World Economy

China Growth Below Expectation

China Growth Below ExpectationChina Growth Below Expectation

China’s investment, factory output and retail sales all grew more slowly than expected in April, adding to doubts about whether the world’s second-largest economy is stabilizing.

Growth in factory output cooled to 6% in April, the National Bureau of Statistics said on Saturday, disappointing analysts who expected it to rise to 6.5% on an annual basis after an increase of 6.8% the prior month, Reuters reported.

China’s fixed-asset investment growth eased to 10.5% year-on-year in the January-April period, missing market expectations of 10.9%, and down from the first quarter’s 10.7%.

Fixed investment by private firms continued to slow, indicating private businesses remain skeptical of economic prospects. Investment by private firms rose 5.2% year-on-year in January-April, down from 5.7% growth in the first quarter.

Reuters reported on Saturday that China’s banking regulator has sent an urgent notice to banks telling them to clear bottlenecks holding back lending to private firms.

In its data announcement, the NBS said, “Because the total amount of private investment is relatively large, the continued slowdown could restrain stable growth, and requires a high degree of attention.”

Retail sales growth in April, which captures both private and government purchasing, quickened to 10.1%. Analysts forecast sales would rise 10.5% on an annual basis after gaining 10.5% the prior month.

Upbeat March data had sparked hopes that China’s economy was picking up after more than a year long blitz of fiscal, monetary and administrative stimulus measures. A recovering property market has also boosted demand for raw materials, giving a boost to long ailing heavy industries such as steel mills.

  Lingering Weakness

But much of the data on April, which included weaker-than-expected exports and imports, and soft factory activity surveys continued to underline lingering weakness in the broader economy.

China produced 268 million tons of coal in April, down 11% on the year, the National Bureau of Statistics said, with producers cutting back in a concerted effort to shore up prices.

China’s coal sector has been struggling with a massive capacity glut and miners have been encouraged to cut production to shore up domestic prices, which plummeted around 30% last year. The country has promised to shed 500 million tons of surplus capacity in the next five years.

China’s economic growth has cooled to 25-year lows, weighed down by a combination of weak demand at home and abroad, factory overcapacity and increasing amounts of debt.

The government has made reducing the capacity glut one of its top priorities, and has vowed to put “zombie” companies out of business. But economists expect authorities to move slowly to avoid a sharp jump in unemployment.

Recently, the Chinese cabinet called for an upgrade of the consumer products sector in order to boost consumption, by improving product quality and implementing regulations to ensure market access and streamline approvals.