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    China: Investment data causes concerns - Danske

    According to analysts from Danske Bank, Chinese investment data surprised to the downside and created concerns about the sustainability of the rebound in economic activity.Key Quotes:“Chinese data on urban investment growth surprised on the downside in May, causing concern over the strength and sustainability of the rebound in activity that happened in the early spring.”“Fixed urban investment growth fell to 9.6% y/y year-to-date (ytd) from 10.5% y/y ytd in April. While still quite high, it was the lowest growth rate in 16 years and at odds with other signs of a moderate recovery. It is mainly private investments pulling down as overcapacity is lingering in many sectors. The development adds to concern that activity is still very much dependent on state spending and credit-fuelled growth.”“Our base case is still for a continued cyclical recovery over the coming quarters driven by the construction sector and exports. However, the investment data today clearly underlines that the improvement is still fragile and that structural headwinds from overcapacity and too much leverage in certain sectors are weighing on the medium-term outlook. Financial markets continue to be very sensitive to negative news on China and Chinese stocks tumbled on today’s news on investments.”  

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