May data point to stabilization; PBoC reiterates commitment to CNY internalization

The remaining set of Chinese data for May released yesterday merely pointed to stabilization of the economy at best. There were few signs of a rebound as yet and suggest that monetary conditions are likely to remain accommodative for the foreseeable future. The data include 1) M2 money supply rose 10.8% y/y from the low of 10.1% in April; 2) Total social financing (TSF), a measure of overall credit growth in the economy, gained trn vs trn in April. 

It is up CNY6.9trn YTD, down 19% for the same period last year. For 2014, TSF eased to CNY16.4trn, down 5% from 2013; 3) Retail sales rose in line with expectations at 10.1% y/y vs 10% previously and up 10.4% YTD; and 4) Industrial production rose 6.1% y/y from 5.9% previously and up 6.2% YTD. May's fixed asset investment disappointed however, falling for the 10th straight month to 11.4% YTD from 12.0% in April. This could reflect stalled approvals due to the anti-corruption drive. 

China as an economy in transition and adjusting to a slower pace of growth, says Commerzbank. The authorities are seemingly testing the waters to ascertain the lower bound of growth before stresses start to surface eg increased job losses and default pressures. In other news, PBoC reiterated its commitment to the internalization of CNY in its latest 'Renminbi Internationalization 2015' report yesterday. It aims to accelerate opening up of its domestic market for foreign investors. It will complete the development of the first phase of the China International Payment System (CIPS) by year-end. This will replace the existing framework and facilitate trade settlements and investments in CNY, adds Commerzbank. For USD-CNY, it continues to hold steady around 6.2070.