ANZ analysts note that China’s both consumer and producer price indexes improved substantially in April, indicating that deflationary risks have largely dissipated, which is good news for the debt-fuelled China economy.

“The pace of credit growth slowed in April on the back of renewed concerns about the risks of increases in China’s macro leverage ratio in Q1. The slower pace of credit expansion also weighed on the growth rate of total social financing (TSF) in the month. Meanwhile, the higher inflation rate in April is unlikely to change the overall monetary policy direction. The biggest near-term uncertainty is the ongoing trade tensions between China and the US.”