Chinese industrial production decelerates sharply in April, likely to roll out supportive measures to help sentiment

China’s manufacturing sector mainly drove the pullback in April, with fixed asset investment and industrial production seeing sharp decelerations in the month. Industrial production growth of the manufacturing sector eased to 5.3 percent year-on-year in April from March’s 9 percent, owing to softer automobile and electric machinery production. Nevertheless, the fixed asset investment growth in the infrastructure sector maintained its previous pace, growing 4.4 percent year-on-year in the January to April period.

In the meantime, property investment performed well in the month, with a huge rise in developers’ funding conditions. Property investment growth rose to 11.9 percent year-on-year in the initial four months of 2019. In the same period, growth of developers’ funding, which holds the key to property investment, also rose to 8.9 percent year-on-year, the most rapid in 20 months, as bank loans, advance payments, and mortgages rose at a more rapid pace. This is also in line with the observations of the recovery in home sales, which rose 0.7 percent year-on-year in January to April, representing the initial positive year-on-year growth in 2019, said ANZ in a research report.

“We maintain our view that property investment in China will remain stable for 2019, despite recent tightening in a few cities”, stated ANZ.

The data released today implies the need to proactive policy support, in particular amidst the escalation in the China-US trade disputes. The renewed tensions might lead to further rise in uncertainties to China’s manufacturing sector, and the data today might trigger market worries regarding the sustainability of China’s recovery in late first quarter.

“We expect China to roll out more supportive measures to shore up sentiment and maintain economic resilience. However, rather than using broad-based monetary easing and policy rate cuts, we believe that Chinese policymakers will favour targeted monetary policies, industrial subsidies, and fiscal policy (including tax cuts) to counter the downside risks”, added ANZ.

At 11:00 GMT the FxWirePro's Hourly Strength Index of Chinese Yuan was neutral at 37.4769 while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 120.415 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex