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China Aug. Growth at Year’s Lowest

China still faces lurking problems and challenges from external uncertainties and domestic transformation, but the lackluster performance will linger for the remainder of the year
Property prices have continued to creep steadily higher, in spite of heavy government intervention, partly due to a shift  to increased demand in the country’s smaller cities.Property prices have continued to creep steadily higher, in spite of heavy government intervention, partly due to a shift  to increased demand in the country’s smaller cities.

Industrial output, a gauge of the activity of large enterprises, grew 6% year on year in August, down from the 6.4% pace a month earlier and retreating to the lowest level this year. Fixed asset investment fell short of expectations with a 7.8% rise in the January-August period, the weakest since 1999.

Retail sales rose 10.1% last month, lower than market estimates of 10.5% and July’s 10.4% rate. Private investment and property sales also registered slower growth, Live Trading News reported.

Thursday’s data came after a strong economic rebound that features forecast-beating GDP expansion in the first two quarters and aroused concerns over the growth impetus of the economy.

Bloomberg chief Asia economist Tom Orlik said in an e-mail that the data showed “a slightly sharper-than-expected loss of momentum,” adding that headwinds against the economy are significant.

“China still faces lurking problems and challenges” from external uncertainties and domestic transformation, NBS spokesperson Liu Aihua said at a press conference, but dismissed worries that the lackluster performance will linger for the remainder of the year.

“Short-term volatility can be triggered by non-economic factors, such as weather and comparison bases, and does not represent the overall trend,” Liu said, adding that high temperatures and more rainfall disrupted factory activity this summer.

Employment was stable and inflation was under control. The surveyed unemployment rate in 31 cities was under 5% last month and consumer prices rose 1.8%. Industrial enterprises saw their profits improve substantially in the first seven months.

“The economy still stayed within a reasonable range,” Liu said, predicting stability in the second half. China has targeted an annual economic growth of around 6.5% for 2017, down from the 6.7% pace recorded in 2016.

The NBS data also pointed to solid progress in the country’s economic rebalancing and industrial upgrades. With old growth engines losing steam, China is pressing forward with a new model of economic development that draws strength from consumption, services sector and innovation.

Services maintained rapid expansion in August, with revenues of information and rental services logging double-digit growth.

Industrial Upsurge

Investment into high-tech sectors jumped 19.5% in the first eight months, while the environmental protection industry saw investment up by 28.2%.

The output of industrial robots surged 63% in the January-August period, and 25% more new energy vehicles rolled off assembly lines.

“In the details, there were some positives for China’s reform and rebalancing story, with most of the slowdown in production coming from investment and output of old-line industries,” Orlik said.

China has made headway in downsizing saturated sectors. Around 128 million tons of excess coal capacity was eliminated during the January-July period, while shoddy steel products were banned.

Economic adjustments continued with improvements in quality and efficiency, Liu said.

Yuan Loans Strong

Chinese banks extended more credit than expected in August, buoyed by demand from home buyers and companies, but there are signs that credit growth may have reached a peak as tighter monetary conditions filter into the broader economy, Reuters reported.

Beijing is trying to reduce financial risks by containing rising debt and defusing property bubbles amid fears they could derail the world’s second-largest economy, although policymakers are seen treading warily before a key party meeting next month.

Chinese banks extended 1.09 trillion yuan ($166.5 billion) in net new yuan loans in August, central bank data showed on Friday, well above analysts’ expectations.

Analysts polled by Reuters had predicted new yuan loans of 900 billion yuan, up from 825.5 billion yuan in July.

Home Prices Rising

The percentage of Chinese households that believe still-hot housing prices will keep rising in the coming quarter, despite state moves to cool them, remains at nearly one-third, a survey by China’s central bank showed.

The People’s Bank of China said its survey of 20,000 households found that 31.8% predicted a price rise in the fourth quarter. That was slightly above the 31.2% who felt that way in the survey for the third quarter.

China’s property prices have continued to creep steadily higher, in spite of heavy government intervention, partly due to a shift to increased demand in the country’s smaller cities.

Prices of new homes in 70 major cities grew 9.7% in July from a year ago, with a monthly increase of 0.4%, official data showed.

 

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