China's Housing Funk Deepens As Manufacturing Falls Short

China’s housing market continued to decline in May as manufacturing disappointed expectations.

The real estate sector saw declines in investment and home prices, while industrial output gained 5.6% in May, according to the National Bureau of Statistics, the latter slowing from April and missing Bloomberg projections.

Retail sales did better than expected, but China’s consumers are still reluctant to return to pre-pandemic spending habits, Bloomberg reported.

This lackluster scenario may prompt Beijing to spur consumer demand in an effort to meet 5% growth targets, possibly through increased government spending and central-bank efforts to put a floor under housing markets and boost lending.

The People's Bank of China on Monday maintained a key interest rate at the same level for the 10th straight month as it tries to support the yuan, which is getting squeezed by the Federal Reserve’s intent to keep rates elevated for some time, according to Bloomberg.

Also read: China Property Stocks Tumble Into Bear Market Despite Government Efforts To Stabilize Sector

China’s retail sales picked up at 3.7% in May to accelerate for the first time since November, but that is far below the typical monthly forward pace of 8% before the pandemic.

In late May, China relaxed mortgage rules and urged local governments to purchase unsold homes as declining housing demand and a weakening foreign trade environment hurt business confidence, prompting companies to consider moving production overseas.

U.S.-traded China exchange-traded funds remained relatively flat at the time of publication Monday.

Krane Shares CSI China Internet ETF KWEB slipped 0.03%, while iShares MSCI China ETF MCHI edged up 0.35% and iShares China Large-Cap ETF FXI gained 0.63%.

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