Fri, Sep 15, 2017 - Page 10 News List

China data suggests economy slowdown

KEEPING UP APPEARANCES:Infrastructure was the largest drag, likely because spending was weighted toward the first half in preparation for a party congress

Reuters, BEIJING

China yesterday posted a rare flurry of disappointing data — including its slowest growth in investment in nearly 18 years — suggesting that the world’s second-largest economy is finally starting to lose some momentum as borrowing costs rise.

Factory output and retail sales also grew less than anticipated, although a rebound in property sales and construction starts is likely to keep China’s overall growth relatively robust and comfortably on target ahead of a key leadership reshuffle next month.

“I think the risk [for China] isn’t in the next couple of months, but rather the next couple of years,” Capital Economics Ltd’s Julian Evans-Pritchard said. “Progress on key structural reforms that really matter, such as boosting the performance of state-owned enterprises, has been quite slow, and the structural drags on growth remain quite strong and are real risks.”

Last month’s data suggested the strong boost from Beijing’s infrastructure building spree might be starting to fade.

Fixed-asset investment, a key growth driver for China, grew 7.8 percent in the January-to-August period from a year earlier, the weakest pace since December 1999 and cooling from 8.3 percent in the January-to-July period.

The main drag appeared to be a slowdown in infrastructure investment due to a significant drop-off in government fiscal spending over the past two months, analysts said.

China frontloaded fiscal spending this year to produce rosy growth ahead of the once-in-five-years Chinese Communist Party Congress next month, Evans-Pritchard said.

However, local governments are constrained by annual budgets and have had to pare back spending in the second half of this year, he added.

That likely had a knock-on effect on industrial output, which rose 6 percent last month year-on-year, the weakest pace in nine months, statistics bureau data showed.

Unusually hot and wet weather weighed on industrial output last month, the statistics bureau said, adding that the economy remained on a steady, improving trend.

On a monthly basis, output rose nearly 0.5 percent.

Investments might have softened further if not for an unexpected rebound in the property market, which directly affects 40 other business sectors in China.

Despite a series of government curbs which have largely succeeded in cooling red-hot housing prices, activity in the property market snapped back last month, possibly as developers turn their focus to smaller cities with fewer restrictions.

Property investment, which mainly focuses on residential real estate, but also includes commercial and office space, grew 7.8 percent year-on-year, versus 4.8 percent in July, according to Reuters calculations from yesterday’s data.

Growth in private investment slowed to 6.4 percent from January to August from 6.9 percent in the first seven months of the year, suggesting that small and medium-sized private firms still face challenges in accessing investment finances.

Private investment accounts for about 60 percent of overall investment in China.

Retail sales also confounded market expectations, rising 10.1 percent year-on-year, the slowest pace in six months and cooling from 10.4 percent in July.

However, sales rose at a decent clip from a month earlier and shoppers are expected to throng the stores and online sites as usual next month over the long Golden Week holiday.

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