A Chinese official yesterday tried to reassure companies and investors that economic growth is stable, despite unexpectedly weak activity last month, but acknowledged it faces pressure from lackluster global demand.
Weakness in factory output, imports and other activity was due partly to summer flooding that caused 200 billion yuan (US$35 billion) in losses and other one-time factors, Chinese National Bureau of Statistics spokesman Sheng Laiyun (盛來運) said.
The poor performance prompted suggestions the Chinese economy might be cooling, despite repeated stimulus efforts by the Chinese government.
Photo: AFP
Growth held steady at 6.7 percent in the second quarter, though that was the weakest quarterly performance since the aftermath of the 2008 global crisis.
“The trend is good,” Sheng said. “Although economic growth dropped slightly, the economy is stable and making steady progress, and the steady trend toward improvement has not changed.”
Sheng said that China faces “downward pressure” from weak global demand as Beijing carries out a marathon effort to nurture consumer-driven growth and reduce reliance on trade and investment.
Data reported yesterday showed retail sales rose 10.2 percent last month from a year earlier, a marked slowdown from June’s 10.6 percent increase.
Factory output rose 6 percent last month from a year earlier, down from 6.2 percent in June, the bureau said, while fixed asset investment, a gauge of infrastructure spending, rose 8.1 percent in the first seven months of the year.
Investment in factories, real estate and other fixed assets rose 2.1 percent in the seven months ending last month, down from the first half’s 2.8 percent and 5.7 percent in the first quarter.
Customs data earlier showed that last month’s exports contracted by 4.4 percent from a year earlier, while imports plunged 12.5 percent.
Analysts were disappointed.
Nomura Holdings Inc’s Hong Kong-based chief China economist Zhao Yang (趙揚) called the figures an “across-the-board slowdown” that showed more weakness than expected.
The investment figures were consistent with a deep contraction in imports that “points to sluggish domestic investment demand,” Zhao said.
“Overall, we think growth momentum continued to lose steam, which was possibly exaggerated by the flooding,” he said.
The disappointing investment figures raise doubts over the effectiveness of policy easing, Julian Evans-Pritchard of Capital Economics said in a note.
“While looser monetary conditions appear to be supporting current conditions and have clearly boosted credit growth, the impact of this step-up in lending on investment has underwhelmed,” he said.
Beijing might need to use “more forceful fiscal policy” during the rest of the year to prevent a further slowdown, he added.
Additional reporting by AFP
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