Growth in China’s fixed-asset investment slipped below 10 percent for the first time since 2000 in the January-to-May period as a boost from record credit growth seemed to be fading, putting expectations of further stimulus back on the table.
The government has taken a more cautious stance on stimulus since commentary in official media last month warned of the risks of growing debt, but analysts said signs of weakness in the latest monthly data might spur policymakers into taking additional steps to support the economy.
“I see rising odds of a cut in [required reserve ratios] RRR or even a policy rate cut, before the end of the second quarter,” Commerzbank economist Zhou Hao (周浩) said in a note after last month’s activity data were released yesterday.
With the economy not yet on a solid footing, other analysts agreed that more stimulus is likely in coming months.
“The government will likely launch more fiscal policies such as faster approval of infrastructure projects as downside risk to growth heightens,” ANZ Hong Kong-based economist Raymond Yeung (楊宇霆) said in a note.
A major worry for the authorities is the continued decline in fixed-asset investment by private companies.
Overall fixed-asset investment growth fell to 9.6 percent year-on-year in the January-to-May period, missing market expectations of 10.5 percent, which would have been unchanged from the January-to-April period.
Investment by private firms slowed to a record low, with growth cooling to 3.9 percent from 5.2 percent in from January to April and double digits last year. Private investment so far this year has been the slowest since China began publishing the data in 2012.
China needs to open up its state sector further in order to arrest the steep slowdown in private investment, Chinese National Bureau of Statistics Sheng Laiyun (盛來運) told a news conference, adding that falling prices and industrial overcapacity have impacted private investment.
Foreign direct investment in China, meanwhile, declined 1 percent year-on-year last month, the first decline since December last year, the Chinese Ministry of Commerce said on Sunday.
Other data published yesterday were more mixed, suggesting that the economy might be bottoming out and less at risk of a hard landing but is still struggling to regain traction.
Factory output grew 6 percent last month year-on-year, the same as in April and marginally better than expected.
Analysts believe industrial output has been supported by a government infrastructure spending spree and a further recovery in the property market.
Investment in real estate last month also posted its first annual slowdown in growth since December last year, although property sales by area surged more than 32 percent.
Despite a jump in car sales, consumption softened slightly. Retail sales growth, which captures both private and government purchasing, slowed to 10 percent on-year.
Analysts had forecast it would be unchanged from April at 10.1 percent.
Trade data last week showed a further drop in exports but the smallest decline in imports in more than a year, suggesting domestic demand was picking up.
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