China’s economic growth eases on rising interest
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.
BEIJING: 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, propped up by a year-long 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, adding fuel to a global recovery.
But economists do not expect any hard landing, with the government keen to ensure stability ahead of a once-in-five-years Communist Party leadership reshuffle in the autumn.
“The upshot is that both foreign and domestic demand appear to have softened at the start of the third quarter,” said Julian EvansPritchard, 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 per cent in July from a year earlier, the slowest pace since January, ac- cording to data from the National Bureau of Statistics on Monday.
Analysts polled by Reuters had predicted output would grow 7.2 per cent, down from a better-thanexpected 7.6 per cent in June.
Despite the softer-than-expected reading, manufacturing activity still appears to be supported for now by an extended infrastructure boom. Beijing has been pouring money into road and rail projects that have fuelled demand for products from construction equipment to glass and steel.
Indeed, China’s steel output rose to a monthly record in July, while power generation was the highest since at least May 2014.
Any sharp drop in industrial activity, which appears to be unlikely at this stage, would be a concern for policymakers as it risks rippling across the broader economy.
In a sign that economic momentum could slow further, fixed-asset investment grew 8.3 per cent in the first seven months of the year, cooling from 8.6 per cent 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 were forced into repeated rounds of cooling measures to curb soaring home prices.
Growth in property investment, which mainly focuses on residential real estate but includes commercial and office space, eased to 4.8 per cent in July from a year earlier, versus 7.9 per cent in June, Reuters calculations based on official data showed.
New construction starts measured by floor area, a telling indicator of developers’ confidence, contracted for the first time since last September, falling 7 per cent in July on-year. The statistic bureau said the overheated property market has cooled “somewhat”, but it still expected China’s economic performance to be steady in the second half.
The performance in July was stable, the bureau said. Growth of private investment also ebbed to 6.9 per cent 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 per cent of overall investment in China.