Worst of China slowdown may be over

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A slew of data from China, including retail sales and industrial production, matched analysts' expectations, offering some indication the worst of the mainland's economic slowdown may be over.

"The figures are suggesting that perhaps the economic momentum has bottomed out," Loius Kuijs, a China economist at RBS, said. "But they're still not very strong and they don't suggest any swift recovery in growth. This is especially true with regard to investment, which was actually a little disappointing."

In May, according to government figures, retail sales rose 10.1 percent from a year earlier, matching expectations from a Reuters poll and slightly stronger than April's 10 percent rise despite recent signs of weak domestic demand from worse-than-expected import and inflation figures.

"The bright part of the data continues to be the solid growth of consumption, where the fact that we still have a solid service sector means we still have good employment creation," Kuijs said. "That's cushioning pressure in the industrial sphere."

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Government industrial output figures for May also rose 6.1 percent from a year earlier, matching forecasts from a Reuters poll and slightly stronger than the 5.9 percent increase in April. But fixed asset investment for the January-to-May period rose 11.4 percent from the year-earlier period, below the 12.0 percent forecast in a Reuters poll, suggesting the country's economy is continuing to slow.

Weak investment data

RBS' Kuijs said the investment data was weak by China's standards, with weak real estate and corporate investment offset by the government's efforts to support infrastructure spending.

After the release of the data, the Shanghai Composite slipped into negative territory, down 0.27 percent, and Hong Kong's Hang Seng Index slipped a tad off highs, although it remained in positive territory.

Others were not optimistic about what the data were signaling.

"Today's activity data, plus the soft external trade figures released earlier, suggest that the gross domestic product (GDP) growth could miss 7.0 percent in the second quarter," ANZ said in a note Thursday. "It appears that the monetary easing so far has had limited impact on improving growth momentum."

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A slew of recent data have missed analysts' expectations. China's imports tumbled 17.9 percent in May, more than the 10.7 percent drop forecast in a Reuters poll, data released Monday showed.

China's consumer price inflation (CPI) rose 1.2 percent in May from the year-earlier period, slightly below the 1.3 percent forecast in a Reuters poll and below the 1.5 percent rise in April.

Action from the central bank?

In the first quarter, China's economic growth slowed to 7.0 percent, its slowest in six years. China's economy expanded 7.4 percent in 2014, its slowest pace in 24 years and undershooting the government's target for the first time since 1998.

So far, the People's Bank of China (PBOC) has cut interest rates three times in the past six months amid concerns that the government's annual gross domestic product growth (GDP) target of "around 7 percent" could be at risk. The latest rate cut followed two rounds of cuts in the reserve requirement ratio (RRR) of major banks, the latest one bringing the rate down to 18.5 percent.

ANZ expects more easing measures are on the cards, especially as plans to increase the supply of local government bonds may crowd out demand for credit in the private sector. It forecasts the PBOC will cut interest rates by another 25 basis points this month, with another 100 basis points of RRR cuts over the course of the year.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1