Although most commentators were optimistic, many government officials started to question the likelihood of a V-shaped recovery and suggested that the economy may remain in the doldrums for an extended period.

When they surveyed business sentiment in March, officials from the National Bureau of Statistics (NBS) reported that the outlook was generally optimistic. However, when they undertook a similar survey recently, the confidence of some businesses had taken a big hit.

Company profits and corporate tax receipts are two of the best indicators of minor changes taking place in the industrial economy. While national tax revenues registered a year-on-year decline of 10.3% in the first quarter this year. In April, revenue dropped further, with a 13.6% year-on-year decline. These numbers show that business is still doing it tough

Despite this, economists generally interpreted April’s numbers as a sign that the economy was starting to pick up. Retail figures and the growth in the amount of fixed capital investment both exceeded expectations, and, although inflation and foreign investment fell, there was a slowing in the pace of the decline.

Others have also noted the large number of inconsistencies in April’s economic figures. For instance, although the rate of growth in industrial value-addedoutput had decreased on the March figure, and the national power output dipped 3.55% year-on-year, down from the 2% drop in March, the fixed asset investment numbers still registered a record high of over 30% growth.

Another example of statisitical inconsistency can be seen in April’s export figures. China’s Customs said the country’s export realized a month-to-month growth of 8.3% in April; however, according to China’s Ministry of Commerce, the indicator was down 5.5% on the March figure.

Others have questioned the money supply data released in May. According to the central bank, by the end of April, broad money supply (M2) gained nearly 26% to 54.05 trillion yuan from a year earlier. However, a source close to the central bank told EO that additional loans before the end of April were no more than 80 billion yuan, but by April 31, the figure suddenly balloned to 600 billion yuan.

Wang Xiaohui, macro-analyst of Sinolink Securities, was also confused with the increase of money supply. “China’s bank’s loans fell considerably in April, meanwhile, the central bank withdrew a portion of the currency from circulation through open market operations. Furthermore, foreign trade surplus ought to have dropped off slightly in April. These three factors didn’t support an increase of money supply in April,” he said.

Although they had common concerns about the accuracy of the statistics, economists held that macroeconomic situation had gradually begun to improve.

Zhang Liqun, researcher of Development Research Center of the State Council, remarked “some people doubted its accuracy when the government announced the value-added for industrial companies registered a year-on-year increase of 8.3% in March. However, judging from the 7.3% growth in April’s value added indicator, the economy has a basis for recovery.”

Dong Xian’an, macro-analyst of Southwest Securities, projected that China’s industrial output would begin to rally in May, and that output would be up 10% year-on-year in the third quarter.

Chu Jianfang, chief macro-analyst at Citic Securities, predicted that the decline of China’s producer price index (PPI) was about to bottom out in the second quarter and would probably begin to bounce back in the following months.

Hua Sheng, an economist, told the EO that judging from the April’s economic indicators, China had been in the early stage of recovery but instability still existed.

Although they agreed on little else, most economists concurred that for the coming two quarters, the economy was stepping out of a deflationary phase.

When questioned by EO on the prospects for China’s economy, a common response from government officials was that “a turn for the better doesn’t mean things improve immediately.” They questioned the likelihood of a V-shaped recovery and predicted that the economy was likely remain subdued for an extended period.