Robust growth fades in July

Economy on track to meet annual target

China’s strong economic growth showed visible signs of fading in July as lending costs rose and the gravity- defying property market cooled, though activity levels generally remained solid thanks to a yearlong construction spree.

Industrial output, investment, retail sales and trade all grew less than expected last month, after the world’s second- largest economy put in a surprisingly strong showing in the first half of the year, adding fuel to a global recovery.

But economists do not expect any hard landing, with the Chinese government having shown strong commitment to ensuring economic stability.

“Both foreign and domestic demand appear to have softened at the start of the third quarter,” said Julian Evans- Pritchard, China economist at Capital Economics.

“A few sectors, such as steel, seem to have defied this slowdown in economic activity. But the strength in these areas likely won’t last given that policy tightening is set to further weigh on infrastructure and property investment in coming months.”

Factory output rose 6.4 percent in July from a year earlier, the slowest pace since January, according to data from the National Bureau of Statistics ( NBS) on Monday.

Analysts polled by Reuters had predicted output would grow 7.2 percent, down from a better- than- expected 7.6 percent in June.

Despite the softer- than- expected reading, manufacturing activity still appears to be supported for now by an extended infrastructure boom. Indeed, China’s steel output rose to a monthly record in July, while power generation was the highest since at least May 2014.

In a sign that economic momentum could slow further, fixed- assets investment grew 8.3 percent in the first seven months of the year, cooling from 8.6 percent in the first half of the year. Analysts had expected the pace to remain steady.

Property investment, in particular, showed signs of fatigue after local governments took repeated rounds of cooling measures to curb soaring home prices.

Growth of private investment also ebbed to 6.9 percent in the first seven months of the year, suggesting small and medium- sized firms still face challenges in accessing financing. Private investment accounts for about 60 percent of overall investment in China.

“Combined with the previously released data on trade, demand and production visibly slowed in July,” said Li Qilin, an analyst with Minsheng Securities.

China has surprised most pundits this year, with the economy growing by a faster- than- expected 6.9 percent in the first half. That momentum should ensure the government comfortably meets its full- year growth target of around 6.5 percent.

The NBS said that the economy will maintain stability in the second half of the year, with stable investment and exports expected.