Global cheers over China's decision to cut interest rates faded quickly on Friday as investors and economists worried that the move signalled the impending release of some grim economic data.
China's surprise rate cut unveiled late on Thursday boosted hopes that cheaper credit would help combat its faltering economic growth and it encouraged global share markets in their belief that the major economies were stepping up stimulus.
But the central bank's cut, the first since the global financial crisis in late 2008, has also raised concerns about a deluge of May Chinese data due this weekend, with Asian shares losing ground on Friday, bracing for ugly numbers.
Reuters polls published earlier in the week suggested the world's second-largest economy probably showed signs of stabilising last month from a surprisingly weak April. Now, some economists worry that those expectations may be misplaced.
"The concern is that with industrial production and CPI data coming out of China at the weekend that it's indicative of them knowing something about weak data going forward," said Adrian Schmidt, currency strategist at Lloyds Bank in London.
The outlook was already looking grim by Chinese standards.
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Analysts forecast in a Reuters benchmark poll in May that China would deliver its weakest quarter of growth in three years in the second quarter at 7.9%. It would also mark the sixth straight quarter of slowing growth.
They expected 2012 full-year expansion of 8.2%, a pace that industrial nations would envy but would be the weakest outcome for China since 1999.
The People's Bank of China (PBOC) cut the official one-year borrowing rate by 25 basis points to 6.31% and the one-year deposit rate by a similar amount to 3.25% in an announcement after Asian markets closed on Thursday.
While the cut to borrowing costs should help in the near term to shore up the economy, the central bank also gave banks additional flexibility to set competitive lending and deposit rates in a step along the path of financial liberalisation.
The PBOC said it was giving banks the freedom from June 8 to set deposit rates as high as 110% of the benchmark rate and offer rates on new loans for as little as 80% of official policy rates, an additional 10%age points of leeway from the current 90% limit.
Commercial banks until now have been barred from charging rates on deposits higher than the benchmark set by the central bank.
Based on Reuters polls earlier this week, fixed asset investment and industrial production numbers for May - two of China's most crucial indicators of activity and job creation - are forecast to show signs of stabilising.
"Flat is not the most desirable," Ren Xianfang, senior China analyst at consultancy firm IHS Global Insight, said before the rate cut was announced. "But it is better than getting worse."
Industrial production probably rose in May by 9.9% from a year earlier, picking up from a 34-month low in April of 9.3%, the Reuters polls show.
Fixed-asset investment growth in the first five months of the year compared with the same period last year is expected to stay at a decade-low pace of 20.0%, little changed from 20.2% in April's data covering the first four months of the year.
Key year for leadership
The rate cut follows a decision to accelerate key investment projects, announced by Premier Wen Jiabao at a regular cabinet meeting on May 23.
Until Thursday, Chinese policymakers had been wary of loosening policy too far and had referred to "fine tuning" policy to support growth.
Beijing is still tackling the after-effects of the 4 trillion yuan stimulus programme unveiled in late 2008 during the global financial crisis.
The programme triggered a frenzy of real estate speculation, saw local governments amass 10.7 trillion yuan of debt and drove inflation to a three-year peak by July 2011.
"China is recognising that they have to keep their economy stimulated and growing," said Gordon Charlop, a managing director at Rosenblatt Securities in New York.
"They will be proactive to make sure they don't run into any of the problems we've faced and are facing and Europe is facing."
Beijing wants to see growth solidly underpinned before a once-a-decade leadership change at the top of the ruling Communist Party, due towards the end of this year.
But it is likely to be wary of setting off a fresh round of price hikes that could put social stability at risk.
High inflation has preceded political tension in China in the past - something the government is desperate to avoid as the leadership change has already been complicated by the purge of populist politician Bo Xilai and the murder scandal surrounding his fall.
Michael Derks, chief strategist at FXPro in London, said the rate cut "reflects Beijing's increased confidence that inflationary pressures are easing".
The consumer price index is expected to have risen 3.2% in May from a year earlier, down from April's 3.4% and safely below the official 4% target for 2012.
A slight pick-up in export growth is also forecast for May. The consensus call of 6.8% would be comfortably ahead of April's 4.9%, but still well below the official 10% expansion targeted for the full year.
Import growth, forecast by analysts at 5% year-on-year in May, would be an improvement on April's 0.3% rise, but again well below the 10% target and an indication of still fragile demand at home and abroad.