A mixed set of data over the past month has dampened hopes that rapid recovery is already underway in China. Reported investment growth is rising, yet sales of key investment inputs such as steel, which may be a better guide to actual investment, are still low. Industrial value-added growth has edged up, but industrial sales growth is still falling and exports remain very weak. Consumption is a bright spot, weakening only slightly in real terms. Overall, China is on the mend, but given the recent shock and continuing global weakness, it would be unreasonable to expect private firms and households to go on increasing spending as before. We remain unconvinced that the stimulus is large enough to take up the slack.
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