No major policy loosening in near future

As major economic indi-cators for May were released, a recovery in the economic growth is becoming more evident. Based on the im-proved prospects, chances for authorities to further loosen the monetary stance are quickly diminishing.

Trade figures bode well for an economic recovery. Ex-ports jumped 7 percent to $355 billion in May, while imports dropped 1.6 percent to $159 billion. The govern-ment started to crack down on fake trade since May last year. So last month's figures reflected the real picture of trade. As exports picked up speed last month, it indicated a recovery in demand. The decrease of imports does not indicate a slowdown in do-mestic demand, because the drop is more a result of recent probes into copper financing frauds, which caused traders to slash their imports of commodities.

Purchasing managers index also points to an improve-ment in the manufacturing industry. The index stood at 50.8 percent in May, com-pared with 50.4 percent in April. The increase is the third monthly rise in a row.

Retail sales jumped 12.5 percent in May, faster than 11.9 percent a month earlier. This is a strong proof of stronger demand.

Non-manufacturing PMI also did well. It was 55.5 percent in May, an 11-month high that rose from 54.8 percent in April. Clearly, the service sector is also improv-ing.

Apart from an all-round recovery in demand, busi-nesses also bask in an in-crease in bargaining power. Last month, producer price index, which measures prices of goods at a wholesales level, declined 1.4 percent. The drop was slowing down from April's 2 percent decrease and was the smallest this year so far. Meanwhile, consumer price index grew 2.5 percent in May, the highest this year. The two sets of price indexes showed businesses can bene-fit from an improved profit margin.

Another set of economic indictor, which top policy-makers pay much attention to, also paints a better picture. The surveyed unemployment rate hit 5.07 percent in May, better than 5.15 percent in April and 5.17 percent in March. As the labor market remains stable and is im-proving, chances for policy-makers to dramatically change the monetary stance are slight.

This month, the central bank cut the required reserve ratio for selected lenders. This is the second time China has used the targeted-easing strategy since its economic growth went lower than the yearly target of 7.5 percent in the first quarter.

As signs have emerged that the economic growth is bouncing back and as the renminbi has reversed a de-clining trend to start appreci-ating against the US dollar, it is highly likely that top poli-cymakers will not resort to any monetary loosening in near future. Across-the-border easing measures will be used only after the selective easing measures fail.

The author is a financial analyst based in Shanghai.