China’s investment slows as output declines

UNEXPECTED DECELERATION::Although China’s investment and industrial-production figures are ‘quite weak,’ they are not likely to trigger a policy easing, an economist said


Tue, May 14, 2013 - Page 15

China’s fixed-asset investment unexpectedly decelerated last month, while industrial output trailed estimates, adding to concerns that the economy will fail to show much of a recovery this quarter.

Fixed-asset investment excluding rural households in the first four months of the year increased 20.6 percent, the Chinese National Bureau of Statistics said yesterday, compared with 20.9 percent in the first quarter. Production grew 9.3 percent last month from a year earlier and retail sales climbed 12.8 percent, the agency said.

“China’s economic recovery remains weak,” Shanghai-based Standard Chartered PLC economist Li Wei (李威) said. “The government will stay vigilant on local-government debt, keep property-market controls and discourage public spending. All of those measures will restrain China’s growth rebound.”

The gain in industrial output compared with the 9.4 percent median estimate in a survey of 38 analysts and an 8.9 percent increase in March. The median projection for retail-sales growth was 12.8 percent, after a 12.6 percent increase the previous month.

Economists estimated fixed-asset investment rose 21 percent in the first four months of the year, based on the median forecast.

Stocks in China pared losses after the report. The benchmark Shanghai Composite Index was 0.2 percent lower at the close.

The latest data indicate that second-quarter economic growth “may be somewhat better” than the first quarter’s, though it’s “still unlikely to be much better,” Hong Kong-based Societe Generale SA China economist Yao Wei (姚煒) said.

“Production only had very modest improvement,” excluding so-called base effects from last year’s figures, she said.

In its quarterly monetary-policy report last week, the People’s Bank of China said that the “foundation for stable economic expansion isn’t yet solid.”

However, the country cannot be “blindly optimistic” about the inflation outlook when uncertainties remain in areas such as property and farm-produce prices, it said.

While yesterday’s investment and industrial-production figures are “quite weak,” they are not “bad enough to trigger a policy easing,” Hong Kong-based Nomura Holdings Inc chief China economist Zhang Zhiwei (張智威) said in a note.

The pickup in factory production from March’s figure reflects a distortion from last month having two more working days than last year’s month, Zhang said.

Zhang maintained his forecast for 7.5 percent economic growth this quarter, down from 7.7 percent in the previous period.

Standard Chartered on Friday became the latest bank to lower its growth estimates for China, cutting this year’s forecast to 7.7 percent from 8.3 percent.

“There are few signs of renewed dynamism,” the bank wrote in a report. “Credit growth should support near-term activity, though it raises questions about leverage, credit quality and growth sustainability in the next few years.”

Goldman Sachs Group Inc, Royal Bank of Scotland Group PLC and JPMorgan Chase & Co last month cut their estimates for China’s growth this year to 7.8 percent after economic expansion slowed.