China’s Industrial Output Unchanged In May

The world’s second largest economy remains steady in May as industrial output held up against diminishing growth in private investment.

Industrial production climbed 6 percent in May from a year earlier, according to the National Bureau of Statistics on Monday. Retail sales rose 10 percent, while fixed asset investment reportedly increased by 9.6 percent this year so far.

This combined with positive imports and moderating factory gate deflation in May, suggest that policy makers have underpinned the near-term outlook with fiscal support and monetary stimulus even as restructuring initiatives start to hurt some industries.

“At this moment the growth momentum is stable,” said Larry Hu, head of China economics at Macquarie Securities in Hong Kong. “This is comfortable for policy makers and will give them more time to focus on supply-side reforms.”

Fall in fixed asset investment was mostly due to reducing coal and ferrous metals investment by privately owned enterprises, said Iris Pang, senior economist for Greater China at Natixis SA in Hong Kong.

“This is a reflection of high excess capacity in those sectors,” she said. “POEs are staying away from investments. However, the overall FAI shows SOEs are supporting the overall economy,” she said, using abbreviations for private- and state-owned enterprises.

The Chinese yuan headed for its biggest loss in two months as trading resume for the first time since Wednesday. The local currency fell 0.4 percent to 6.5879 as of 10:04 a.m. in Shanghai, after a gauge of the greenback’s strength rose 1.1 percent during mainland market holidays.