MNI China Press Digest May 12: CPI, Bond Yields, Shanghai

Highlights from Chinese press reports on Friday:

• China’s CPI increased by 0.1% y/y in April which shows economic confidence remains subdued and the economy needs fiscal policy support to boost domestic demand, according to analysts interviewed by 21st Century Herald. Consumption has led the recovery, but the service sector requires policy support to ensure the expansion of employment and raise incomes, according to one analyst. Several regions have begun major projects but are mostly focused on high-end manufacturing industries such as new energy and chips. The government needs to address weak prices, which hurts firms profits and private investment, Yicai said.
• China’s economy will experience continued low production and weak demand recovery in H2, as the government has not given any indication it will change policy, leading to low bond yields, according to analysts interviewed by 21st Century Herald. The economy has shown positive signs of recovery in Q1, but bond yields have remained down. The mid- to long-term growth trajectory, given the uneven rebound, has analysts concerned. The central bank has not began tightening rates and investment firms have increased bond allocations as residents' financing needs have not yet recovered, which has contributed to falling yields and divergence with fundamentals, the news outlet said.
• Shanghai’s offline consumption during the May holiday period recovered to 90% of 2021 levels and increased 6.2% over 2019, according to Zhang Guohua, deputy director of Shanghai Municipal Commission of Commerce. Speaking with Yicai, Zhang said the city has added 375 new physical stores between January and April. In Q1, Shanghai's use of foreign investment increased 28.1% y/y, with high-tech industries growing at 45.9%, and 16 multinationals opened up new regional headquarters. Looking forwards, Shanghai will continue to prioritise expanding consumption and boosting foreign investment, Zhang said.