Economic data released from China over the weekend posed fresh doubts over government’s and its fiscal stimulus’s ability to boost growth in world’s second largest economy.

• Retail sales rose 10.1% y/y, missing expectations and prior growth of 10.5%.
• Industrial production rose just 6%, down from 6.8% y/y in March and below 6.5%, expected by economists.
• Urban investments were weaker too at 10.5% y/y, below 10.7% prior and 10.9% expected.
• M2 money supply also dropped to 12.8%, compared to 13.4% prior.

This year Chinese government has launched fiscal stimulus, worth trillions of Dollars but with efficiency of marginal capital to boost growth, stimulus may not be sufficient.

Over the past year, may Chinese companies have defaulted on their loan obligations, including state owned enterprises, which means without implicit and explicit guarantees from state, Chinese privatization will be very difficult. Any companies being privatized will face increase in interest rates.

China city Construction Holding Group Co. saw sharp rise in their yields on dim sum bonds, after surprise privatization. Company has now requested PBoC to provide explicit guarantees that it won’t fail to calm investors’ nerves.

So far China has played down the risks in its bond market.