China's Resilient May Data Offers Glimmer Of Hope, But NBS Warns Of Challenges Ahead

The Chinese economy is recovering from the slowdown seen in the wake of the COVID-19 lockdowns in late-March and for much of April.

A trio of data released by the China National Bureau of Statistics showed that retail sales, industrial production and fixed-asset investment, all came in better than expected.

China Springs Back Up: Retail sales fell 6.7% year-over-year in May, but the decline was less than feared and slower than the 11.1% decline in April. The consensus estimate called for a 7.1% retreat.

Industrial production unexpectedly increased in May, with output climbing 0.7% year-over-year, reversing from the 2.9% decline in the previous months. Economists, on average, were modelling for a 0.7% drop.

Fixed-asset investment for the year-to-date period rose 6.2% in May, slower than the 6.8% in the January-April period. The metric, however, was better than the 6% rate expected by economists.

Due to the COVID-19 prevention and control measures, production and demand gradually recovered, the NBS said.

Related Link: iPhone Development Said To Take Hit From China Lockdowns; Apple Asks Suppliers To Speed Up

Not Out Of The Woods Yet: The continued downtrend in retail sales in the world's most populous nation triggers concerns about consumer spending. Apart from serving as a production base for most big techs, China is also a key market from the demand perspective. High-profile tech companies such as Apple, Inc. AAPL get a significant revenue share from China.

Domestic tech giants, including Alibaba Group Holding Limited BABA and Tencent Holdings Limited TCEHY have all seen their fundamentals deteriorate, with the predicament partly attributable to the domestic economic softness.

Resumption of production amid the lifting of lockdowns, however, bodes well for the country. China is facing additional risk from its property market, which is on a downward spiral. And the communist regime in China has been a stickler with its COVID-19 control measures, and this has the potential to slow down recovery.

NBS had a word of caution about the near term.

"However, we must be aware that the international environment is to be even more complicated and grim, and the domestic economy is still facing difficulties and challenges for recovery," the agency said.

The iShares MSCI China ETF MCHI is up 1.27% at $53.44 on Wednesday, according to Benzinga Pro.