Friday, June 8, 2012

China rate cut raises fears of grim May economic data | Reuters

China rate cut raises fears of grim May economic data | Reuters

China rate cut raises fears of grim May economic data

BEIJING, June 8 | Fri Jun 8, 2012 5:44am IST
(Reuters) - Global cheers over China's decision to cut interest rates could fade to stony silence if, as some economists fear, the move signals that some grim economic data are about to be released.
China's surprise rate cut unveiled on Thursday has boosted hopes that cheaper credit will help combat its faltering economic growth and has encouraged global share markets in their belief that the major economies are stepping up stimulus.

But the central bank's cut, the first since the global financial crisis in late 2008, has also raised concerns about a deluge of May Chinese data due this weekend.

Reuters polls published earlier in the week suggested the world's second-largest economy probably showed signs of stabilising last month from a surprisingly weak April. Now, some economists worry that those expectations may be misplaced.

"The concern is that with industrial production and CPI data coming out of China at the weekend that it's indicative of them knowing something about weak data going forward," said Adrian Schmidt, currency strategist at Lloyds Bank in London.

The outlook was already looking grim by Chinese standards....

Beijing is still tackling the after-effects of the 4 trillion yuan ($635 billion) stimulus programme unveiled in late 2008 during the global financial crisis.

The programme triggered a frenzy of real estate speculation, saw local governments amass 10.7 trillion yuan of debt and drove inflation to a three-year peak by July 2011.

"China is recognising that they have to keep their economy stimulated and growing," said Gordon Charlop, a managing director at Rosenblatt Securities in New York.

"They will be proactive to make sure they don't run into any of the problems we've faced and are facing and Europe is facing."

...Import growth, forecast by analysts at 5 percent year-on-year in May, would be an improvement on April's 0.3 percent rise, but again well below the 10 percent target and an indication of still fragile demand at home and abroad.  [Please click on the hyperlink above to see the entire article.]

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