China's Economy Faces Slowdown as Indicators Point to Sluggish Growth

As China's economy enters the second quarter of the year, there are indications of potential sluggish growth if the current trends persist, prompting expectations for monetary policy easing. The National Bureau of Statistics is set to release data on retail sales, industrial production, and fixed asset investment for April, with analysts expecting a slight increase compared to March.

China plans to issue its first ultra-long bond, with a 30-year term, as part of a 1 trillion yuan ($138.25 billion) program for major strategic projects. The Ministry of Finance has announced that the proceeds will be spread out until November, with potential economic benefits expected to materialize in the first half of the following year.

Expectations for Monetary Policy

Oxford Economics anticipates a softening in economic momentum based on this week's economic data releases, reinforcing forecasts for the central bank to cut rates by the end of June.

Despite persistent challenges in the real estate sector, new loan data for April revealed a sharp slump in demand, with several metrics reaching their lowest levels in at least two decades. The slowdown in credit growth raises concerns about potential deceleration in economic activity going forward.

The China Beige Book survey found that corporate borrowing declined, while manufacturing experienced increased demand, despite a general decrease in borrowing costs. Additionally, the measure of money supply, M2, grew at its slowest pace on record, signaling a potential further slowdown in credit expansion.

Despite rising trade tensions, China's exports have remained resilient, while consumer prices experienced a modest pickup in April. However, factory prices continued to decline, reflecting ongoing challenges in the real estate sector.

Analysts and policymakers anticipate potential policy measures to address challenges in the real estate market, with a major government meeting scheduled for July expected to provide insights into longer-term economic policies.