China urged to produce more reforms rather than stimulus

CPI already rose to 2.4%.

According to UBS, China’s State Council announced its reform agenda for this year, with particular focus on expanding tax and fiscal reform, reducing administrative controls and approvals, capital account liberalization and the opening up of railway sector for local and corporate investment and participation.

In recent weeks, the government at various occasions signaled that while stabilizing growth is one of the top objectives this year, reform and liberalization to unlock autonomous growth and reducing financial risk are also high on the agenda.

Here's more from UBS:

The latest PBC monetary policy report refrained from implying any policy easing in the near term, instead called for further reforms to unlock the domestic new growth drivers and expressed concerns about increasing corporate leverage and complex financing activities at the local government level.

We do not expect the government to ease monetary policy further or come out with new stimulus this year as some market participants seem to expect.

April inflation remained moderate, with CPI rising to 2.4%y/y, led by the rise in food especially vegetable prices. Meanwhile, PPI declined further, thanks to the drop in commodity prices and a still weak domestic recovery.

We expect the PBC to maintain the current accommodative monetary policy in the near future, while tighter regulations on shadow banking is expected to slow down credit growth modestly in the coming months.