China's economy flashed more warning signs in May as the United States ramp...
BEIJING - China’s economy flashed more warning signs in May as the United States ramped up trade pressure, with industrial output growth unexpectedly slowing to a more than 17-year low and investment cooling, underlining a need for more stimulus.
The reading was the weakest since early 2002, and exports were a major drag, showing only marginal growth. Analysts at Goldman Sachs said in a note they expect authorities to further cut banks’ reserve requirement ratios to free up more funds to lend and lower interbank interest rates. But they do not expect China to actively use currency depreciation to support the economy.
The PBOC has already slashed RRR six times since early 2018 in a bid to turnaround soft credit growth. It has also injected large amounts of liquidity into the financial system and guided short-term interest rates lower. Analysts say China is readying itself for a prolonged trade dispute, after both sides raised tariffs on each other’s goods last month and U.S. President Donald Trump threatened more.
The PBOC has repeatedly urged state-controlled banks to keep lending to cash-strapped smaller, private firms at lower rates, even if they are facing short-term financial difficulty, but average rates edged back up in the first quarter.
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