China’s growth flags in May, but exports strong

BEIJING (Reuters): China’s inflation, industrial output and retail sales all flagged in May for a second straight month of sluggish growth that galvanized policymakers last week into taking their boldest action yet to combat a sharpening slowdown.

A flurry of data over the weekend explained China’s surprise cut in interest rates on Thursday - its first since the global financial crisis - by showing the extent of the domestic economy’s weakness. The rate cut followed a number of measures designed to get money flowing back into the economy.

Beijing could offer more support if needed to combat risks from the euro zone debt crisis, which claimed Spain this weekend as the fourth country to seek financial support, and to promote stability in a year of leadership change, analysts said.

“Monetary policy should continue to lean towards loosening,” said Wang Jun, an economist at the government-backed think tank China Center for International Economic Exchange.

Premier Wen Jiabao and other policymakers appeared to be jolted by dire economic figures for April, released a month ago.

In recent weeks they have approved languishing investment projects and launched a number of reforms to allow private investment into sectors previously dominated by the state.