China’s industrial growth slowed further last month as Beijing clamped down on a credit boom, fueling expectations it will ease monetary policy to shore up its economic expansion.
Inflation spiked to its highest level this year as summer flooding wrecked crops, but analysts said the increase will likely prove temporary.
The government data yesterday added to signs China’s boom is cooling and fed expectations Beijing needs to reverse course after imposing lending curbs this year to prevent a bubble in stock and real estate prices.
“This tells us economic growth is continuing to slow,” said economist Zhu Jianfang (朱建方) of Citic Securities (中信證券) in Beijing. “If they don’t make changes, the economy will see a danger of further sliding.”
Economic growth slowed from a blistering 11.9 percent in the first three months of the year to 10.3 percent in the second quarter. A further fall in Chinese growth could have global repercussions if it hurts demand for US and European factory equipment, industrial components from Asian economies and iron ore and other raw materials from Australia, Brazil and elsewhere.
Last month’s growth in factory output slowed for a fifth month to 13.4 percent over a year earlier, its lowest level this year. Retail sales and investment in factories and other fixed assets also slowed.
The consumer price index (CPI) rose 3.3 percent over a year earlier, its fastest rate this year as summer flooding wrecked crops and disrupted shipping. The jump was driven by a 6.8 percent surge in food costs.
However, analysts expect inflation to fade quickly.
“July’s CPI reading is likely to mark the high point for the year,” said Tom Orlik, an analyst for Stone & McCarthy Research Associates, in a report. “With price pressures set to fade, the government will be free to focus on supporting growth.”
A statistics bureau spokesman said the declines in last month’s economic indicators were “not big” and could be positive for official efforts to improve China’s economic efficiency. He gave no sign the government plans to change policy.
“The fall in economic indexes is mainly a result of the government’s active macro controls,” said the spokesman, Sheng Laiyun (盛來運), at a news conference. “Appropriate declines in economic growth are helpful to prevent overheating, and also are good for accelerating economic structural changes.”
Private sector economists have lowered forecasts of China’s growth this year due to the credit curbs, but say it should easily meet the government’s target of 8 percent.
The National Bureau of Statistics also reported yesterday that growth in spending on factories, real estate and other fixed assets in the first seven months of the year fell to 24.9 percent, down from 25.5 percent for the first half. Retail sales rose 17.9 percent, down from 18.2 percent growth for the first half of the year, the statistics bureau said.
Meanwhile, last month’s housing prices held steady from June levels in a sign the government’s lending curbs were working, but that easing has come at the cost of a slump in sales and construction, which in turn have sharply cut bank lending. The central bank reported yesterday that total lending by China’s banks fell to 532.8 billion yuan (US$78.7 billion), down nearly 12 percent from June’s 603.4 billion.
Banks last year lent a record 9.6 billion yuan, or an average of 800 billion yuan per month, under orders to support Beijing’s stimulus.
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