There were signs in May’s data that economic growth was stabilising. In particular, industrial output growth reversed a small part of the April slump. This was most likely the result of a pick-up in infrastructure project approvals in the last few months that has driven a turnaround in state sector investment. But China’s economy overall remains weak and further support will be needed to return it to strength. This now seems to be forthcoming. Lending rebounded in May. A cut to benchmark interest rates and clearer government commitment towards policy easing should support stronger investment in the months ahead.
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