China Retains Borrowing Cost; Industrial Output Growth Eases

China's central bank kept its short-term borrowing costs unchanged after the U.S. Federal Reserve decided to hike its rate for the second time this year.

Major economic indicators suggested a slowdown in economic activity in May as lending curbs weigh on industrial activity.

The People's Bank of China, on Thursday, maintained the 7-day reverse repo at 2.55 percent and the rate on 14-day tenor at 2.70 percent.

The benchmark one-year lending rate has been unchanged since October 2015.

Industrial production climbed 6.8 percent but slower than the 7 percent increase logged a month ago, the National Bureau of Statistics reported. The growth rate was expected to remain unchanged at 7 percent.

Likewise, retail sales growth eased to 8.5 percent from 9.4 percent. Economists had forecast a faster increase of 9.6 percent.

During the January to May period, fixed asset investment increased 6.1 percent compared to the expected increase of 7 percent. At the same time, property investment climbed 10.2 percent annually in January to May period.

The surveyed jobless rate dropped marginally to 4.8 percent in May from 4.9 percent in April.

The boost to industrial output growth from the removal of the government's pollution controls at the end of March has now faded, Chang Liu, an economist at Capital Economics, said.

And with headwinds from slower credit growth increasing, economic growth looks set to continue to weaken in the second half of 2018, the economist added.

Mao Shengyong, an NBS spokesman, said China's economic growth remained stable. Nonetheless, uncertainties from external environment have increased.

Further, he said the impact of the Fed's interest rate hike on the Chinese economy is limited.