China’s econ­omy cools, but no worry

Crack­down on debt risks

The Star Early Edition - - BUSINESS REPORT INTERNATIONAL - Cheng Fang and Kevin Yao

CHINA’S econ­omy cooled fur­ther last month, with in­dus­trial out­put, fixed as­set in­vest­ment and re­tail sales miss­ing ex­pec­ta­tions as the gov­ern­ment ex­tended a crack­down on debt risks and fac­tory pol­lu­tion.

Bei­jing is in the sec­ond year of a cam­paign to re­duce high lev­els of debt as au­thor­i­ties worry that riskier lend­ing prac­tices, es­pe­cially in the real es­tate sec­tor, could im­peril the econ­omy.

Data yes­ter­day sug­gested pol­icy mak­ers are mak­ing progress in de­fus­ing fi­nan­cial risks by wean­ing China off its years-long ad­dic­tion to cheap credit and sig­nalled mod­er­at­ing growth over the next few quar­ters.

In­dus­trial out­put rose 6.2 per­cent year-on-year in Oc­to­ber, the Na­tional Bureau of Sta­tis­tics (NBS) said, miss­ing an­a­lysts’ es­ti­mates of a 6.3 per­cent gain and lag­ging a 6.6 per­cent in­crease in Septem­ber.

Fixed-as­set in­vest­ment growth also slowed to 7.3 per­cent in the Jan­uary-Oc­to­ber pe­riod, from 7.5 per­cent in the first nine months. An­a­lysts had ex­pected an in­crease of 7.4 per­cent.

“The mod­er­a­tion in ac­tiv­ity data re­leased to­day sug­gests that growth slowed in Oc­to­ber and adds to our con­vic­tion that it will con­tinue to do so in the quar­ters ahead,” No­mura an­a­lysts wrote in a note to clients yes­ter­day.

In the prop­erty sec­tor, where au­thor­i­ties have tight­ened rules to flush out spec­u­la­tive fi­nanc­ing that has helped drive a two-year boom, sales and new con­struc­tion starts fell in Oc­to­ber.

Prop­erty in­vest­ment growth also cooled to 5.6 per­cent in Oc­to­ber year-on-year, from 9.2 per­cent in Septem­ber, cal­cu­lated from NBS data out yes­ter­day.

“I think this (slow­down in real es­tate) is ex­actly what the gov­ern­ment is look­ing to do. I don’t see them chang­ing their pol­icy course,” said Jonas Short, who heads the Bei­jing of­fice at in­vest­ment bank Sun Hung Kai Fi­nan­cial.

Data on Mon­day showed China’s new loans fell more than ex­pected last month to their low­est in a year as banks tight­ened mort­gage lend­ing.

Sur­pris­ing strength

China’s econ­omy has sur­prised fi­nan­cial mar­kets with ro­bust growth of nearly 6.9 per­cent in the first nine months of this year, un­der­pinned by a re­cov­ery in its man­u­fac­tur­ing and in­dus­trial sec­tors thanks to a gov­ern­ment-led in­fra­struc­ture spend­ing spree, a re­silient prop­erty mar­ket and strength in ex­ports. That has sup­ported the world econ­omy as the Asian gi­ant has con­tin­ued to hoover up com­modi­ties and con­sumer goods, help­ing to stoke un­der­ly­ing global de­mand for cars and smart­phones to TVs and in­dus­trial prod­ucts.

The over­all pic­ture backs the view that the Chi­nese econ­omy is en­ter­ing a pe­riod of mod­er­a­tion rather than rapid de­cel­er­a­tion.

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