PBOC governor Pan Gongsheng signals slower credit growth and offshore FX push

China reflation momentum strengthens in April, likely keeping the PBOC on hold

The desk believes that the improvement in China's reflation momentum, as noted in recent commentary by ING Economics, signals that the People's Bank of China (PBOC) is likely to maintain its current monetary policy stance. With April's economic indicators showing stronger-than-expected growth and inflationary signals, the PBOC is poised to remain on hold rather than engaging in new easing measures. Per the full note, this context positions the Chinese yuan favorably against its peers, particularly as global traders recalibrate their positioning ahead of major economic data releases elsewhere.

China’s second-quarter slowdown underway amid soft consumption

The desk views China's ongoing economic slowdown, particularly in domestic consumption and investment, as a pivotal shift signaling broader economic challenges. Per the full note from ing-think, retail sales growth slowed to a mere 0.2% year-on-year in April—the weakest performance since 2022—highlighting waning consumer confidence and spending. This trend has implications for the yuan as it strains local demand while external demand remains relatively robust. Our insights indicate that while the Chinese government currently lacks a sense of urgency regarding monetary easing, further declines in key economic indicators may trigger policy action later in the year.

China's 'Bumpy Deceleration'

Lead — Goldman Sachs' analysis indicates that China's economy is undergoing a 'bumpy deceleration,' which will trigger additional policy easing. They anticipate that this easing will be smaller in magnitude and enacted later than previous measures taken during economic slowdowns. Specifically, the use of traditional tools, like infrastructure spending, will be complemented by tax cuts, which denotes a shift in strategy from the norm. Per the full note from Goldman Sachs, this shift suggests a more measured approach to stimulating growth in light of current economic conditions.

PBOC resumes injections after two-day pause that forced banks to deploy idle cash