China | An unbalanced economic structure with shrinking credit growth

Summary

China’s 2024 May economic activity indicators continue to display an unbalanced economic structure with strong supply and weak demand, although retail sales mildly picked up.

Key points

• Key points:
• The supply side indicated by industrial production continues to be much stronger than the demand side such as investment and retail sales, although its year-on-year growth also decelerated from the previous month.
• Fixed asset investment continues its deceleration, mainly dragged by real estate investment, suggesting that the housing market continues to be one of the prime risks of the Chinese economy. Consumption marginally picked up but still maintains low growth.
• There are potentially many perspectives to explain China’s ongoing unbalanced economic structure.
• We also observe quite weak credit market data in both April and May, particularly a negative M1 growth. The credit shrinking reflects the weak domestic growth and weak market sentiments and a conservative central bank.
• Risks remain to focus on the real estate market, local government debt, deflation and geopolitics.

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