EM Country Briefing: Slump in China exports reinforce sluggish growth outlook

The latest set of monthly data for May points to tame inflation, steady to modest
domestic demand but a challenging external sector. Headline CPI eased to 2.1% y/y,
industrial production rose 9.2% y/y but exports slipped to 1%. Exports remain a key
swing factor and points to sluggish growth ahead and the associated risks. We look
for 7.5% growth this year which is consistent with the government’s willingness to
tolerate slower growth as a result of economic restructuring. Firm property prices in
the big cities will limit PBoC’s ability to cut rates; USD-CNY seen at 5.95 by year-end.