20180615-招银国际-Infrastructure_investment_and_consumption_plunged_pay_attention_to_credit_defaults_4页_644kb

报告摘要

Economic Summary: China's Economic Performance in May 2018

Core Content

This document provides an analysis of China's economic performance in May 2018, focusing on industrial output, infrastructure investment, retail sales, and credit conditions. It highlights key trends and potential risks, offering insights for investors and policymakers.

Main Points

Industrial Output and Value-Added

Industrial output grew by 6.8% y/y in May, slightly declining from 7.0% in April.
Environmental inspections were launched at the end of May, expected to have a milder impact than in previous years, mainly affecting steel and concrete industries.
Manufacturing growth slowed to 6.6% y/y, while utilities growth increased to 12.2% y/y.
High-tech manufacturing and equipment manufacturing continued to outperform, growing at 12.3% and 9.4% respectively.
New energy vehicles and industrial robots saw output growth exceeding 30% y/y.

Infrastructure Investment

Infrastructure investment declined sharply, with fixed asset investment (FAI) in infrastructure falling to 9.4% y/y in Jan-May, a 3ppt drop from Jan-Apr.
Tightened financing channels for local governments contributed to the slowdown.
Policies announced in April and May aim to boost fiscal spending and accelerate project approvals.
Local government debt issuance has rekindled and is expected to peak in June and July, supporting large-scale projects.

Retail Sales

Retail sales growth dipped to 8.5% y/y in May, the first time below 9.0% in recent years.
Above-limit retail sales also declined, growing at 5.5% y/y.
Automobile sales fell by 1.1% y/y, potentially due to tariff reductions on imported cars and the "6.18" shopping festival shifting consumer behavior.
Annual consumption growth is expected to be slower due to income growth slowdown, but tariff reductions and individual tax reform may help offset the decline.

Credit Conditions

Total social financing (TSF) in May increased by Rmb761bn, marking the lowest monthly increase in 18 months.
Non-standard credit was cut significantly, with a Rmb567bn reduction in 5 months of 2018.
Corporate bond financing turned negative in May, with a net outflow of Rmb43.4bn, due to increased credit risks.
Credit spread widened between different ratings of corporate bonds, indicating increased market stress.
Credit defaults are expected to continue, especially for firms with high leverage and poor cash flows, but large-scale defaults are unlikely due to no major systematic risks and stable macroeconomic conditions.

Key Economic Indicators (May 2018)

Indicator	2016A	2017A	CMBIS 2018E	2018-05
Real GDP (yoy growth, %)	6.7	6.9	6.7	n.a.
Value-added industrial output	6.0	6.6	6.6	n.a.
Fixed asset investment (cumulative yoy growth, %)	8.1	7.2	7.0	6.1
Retail sales (nominal, yoy growth, %)	10.4	10.2	10.1	8.5
CPI (yoy growth, %)	2.0	1.6	2.3	1.8
PPI (yoy growth, %)	-1.4	6.3	3.2	4.1
Export (in USD, YoY Growth, %)	-7.7	7.9	12.0	12.6
Import (in USD, YoY Growth, %)	-5.5	15.9	18.0	26.0
Trade surplus (USD bn)	510	423	349	249.2
M2 (yoy growth, %)	11.3	8.2	8.6	8.3
New Rmb loan (Rmb bn)	12,650	13,530	13,824	1,150
Total social financing (increments, Rmb bn)	17,710	19,440	20,313	761

Conclusion

The economic landscape in May 2018 shows a mixed performance, with industrial output and retail sales experiencing moderate declines, while high-tech and emerging industries continue to outperform. Infrastructure investment has slowed due to financing constraints, but policy support is expected to revive it in the coming months. Credit conditions have tightened, with non-standard credit and bond financing declining, but systemic risks remain low, and credit risk contagion is a key concern. Investors should focus on sound financial firms and high-tech sectors as potential beneficiaries of the current policy environment.