Slower factory output, credit growth disrupt China’s stability graph

Beijing, Aug 12: China’s recent economic stabilisation faltered in July as factory output, retail sales and investment all slowed, while the broadest measure of new credit rose the least in two years.

All main indicators released on Friday missed economist estimates in Bloomberg surveys:

Industrial production rose 6% in July from a year earlier, less than the projected 6.2% gainRetailsalesclimbed10.2% last month versus the estimate for 10.5% Fixed-asset investment increased 8.1% in the first seven months of the year, compared with a projection for 8.9%growthAggregatefinancing was a two-year low of 487.9 billion yuan ($73.4 billion) in July, less than half of the median estimate of 1 trillion yuan in Bloomberg’s survey New yuan loans stood at 463.6 billion yuan, also the slowest pace since July 2014 and less than the projected 850 billion yuan increase The broad M2 money supply rose 10.2%, the weakest gain since April 2015.

“With this downward trend it’s hard to meet the government’s 6.5% minimum target,” said Wang Tao, chief China economist at UBS Group AG in Hong Kong, adding that policy makers are now concerned about rising leverage. “If this slowdown becomes sharper, the government will switch back to prioritising stabilising growth.” Bloomberg

China’s credit growth unsustainable: IMF

The International Monetary Fund on Friday said China needed to slow its unsustainable credit growth and stop financing weak fir ms.

“China’s corporate debt is still manageable, but at approximately 145% of GDP, it is high by any measure,” said James Daniel, IMF Mission Chief for China, in the fund’s annual review of the country.

The IMF has urged China to tackle the root causes of its credit growth risk by easing back on unsustainably high growth targets and lax budget constraints, particularly on local governments and stateowned enterprises. Reuters