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China's May inflation growth accelerates, economic hard landing unlikely |
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2011-6-15
To ease soaring prices, China's central bank has raised interest rates twice this year and hiked the reserve requirement ratio for banks six times.
After the May data report, the central bank announced this year's sixth reserve requirement ratio increase, effective on June 20, which will bring the ratio up to 21.5 percent.
The monetary data of May, announced by the central bank Monday, showed new bank lending tumbled more than 25 percent from April while money supply grew at the slowest pace since 2008.
Analysts expect the tightening policy to continue for the rest of the year to help keep price rises in check.
"The monetary and credit policy has not been overly tight, and will not be tighter in the remainder of the year," UBS Securities economist Wang Tao said. "As CPI inflation has yet to peak, we continue to see two more interest hikes this year, all within the next three months."
Weighed down by a widespread power shortage and the government's tightening policies, industrial value-added output growth slowed to 13.3 percent year-on-year in May, the lowest level since last November.
Fixed asset investment for the January-May period rose 25.8 percent from a year earlier, up from the 25.4-percent rise in the first four months of the year.
Retail sales of consumer goods rose 16.9 percent year-on-year to 1.47 trillion yuan (226.77 billion U.S. dollars) in May.
The market has responded to the data positively with the key Shanghai index climbing 1.1 percent on Tuesday, after analysts said the data indicates the national economy is slowing but does not face a hard landing.
Concerns of a hard-landing have dragged the Shanghai Composite Index down more than 10 percent from this year's peak on April 18.
Although growth in some economic indicators has declined, Sheng said the country's economy is on track for "stable and relatively fast growth."
The latest data shows the economy is still going strong and does not support the hard landing fears, Wang said.
"The bearish sentiment on hard landing will persist for a couple of months, but we believe a hard landing is a low-probability event," Lu said, adding that the robust fixed asset investment figure will offer some comfort for those worrying about a "coming collapse" in China.
Source:Xinhua
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