Stability seen despite slower August

China’s moderate economy in August will not change the stable growth momentum over the whole year, but more efforts are needed to counter external headwinds and boost domestic demand, according to economists.

Slower growth in August was led by weaker industrial output, which rose by 4.4 percent from a year earlier, the lowest singlemonth growth level since 2002. It was down from 4.8 percent in July and 6.3 percent in June, the National Bureau of Statistics said on Monday.

Retail sales growth remained stable, increasing 7.5 percent yearon-year, compared with 7.6 percent in July. Total sales reached 3.39 trillion yuan ($479.8 billion) in August, the NBS reported.

Fixed-asset investment was stable at a growth rate of 5.5 percent for the first eight months, down slightly from 5.7 percent in the January-to-July period, the NBS said.

The country’s overall economic performance remained stable in August, although some indicators showed ups and downs within a short period, Fu Linghui, an NBS spokesman, said at a news conference on Monday.

Fu expressed confidence in achieving economic development goals for the year, given the stable foundation of China’s economy.

“The general industrial structure is improving, which is especially reflected in the faster expansion of the high-tech service industry,” Fu said.

Economists said China’s growth has been affected by subdued investment activity and a decline in exports amid the escalation of China-US trade tensions.

“As the near-term economic outlook remains challenging amid a harsher external environment and soft domestic demand, more significant policy easing is needed to stabilize growth, and we think it will materialize,” said Louis Kuijs, head of Asia economics for Oxford Economics, a British think tank.

Kuijs and his research team forecast China’s full-year GDP will achieve its target and remain stable at 6.1 percent.

Some previously enacted supportive measures have taken effect, especially since July. The People’s Bank of China, the central bank, recently cut all banks’ reserve requirement ratios to boost lending, and the government is advancing the use of the 2020 quota for local government bond issuance to speed up infrastructure spending.

The fresh economic data, to some extent, reflects the results: Growth in infrastructure investment rose to 3.3 percent from 2.7 percent in July, and growth in real estate investment increased to 10.5 percent in August from 8.5 percent the previous month.

Analysts are concerned that the recent increase in consumer inflation — while industrial product prices are contracting — may increase difficulties for the central bank in making policy decisions, such as strengthening industrial production through lowering interest rates or maintaining a cautious stance on monetary easing to prevent soaring asset prices.

“We have the foundation and conditions to stabilize prices and control price levels within a targeted range this year,” said Fu, the NBS spokesman. The government has set the annual consumer price inflation ceiling at 3 percent.

Wen Bin, chief researcher at China Minsheng Bank, said monetary policy should maintain “a proper intensity” — neither too tight nor too loose — and strengthen credit support for manufacturing and private companies.

Wen said the “window of cutting interest rates” through policy is approaching, and the central bank soon will need to reduce an important reference rate, the medium-term lending facility rate.

Through the newly reformed loan prime rate plan, the lending rate should be guided to a lower level, which can reduce financing costs for the real economy and stabilize market expectations regarding economic growth, he added.