BEIJING • China's economy showed further signs of entering a second-half slowdown, as curbs on property, excess borrowing and industrial overcapacity began to bite.
Industrial output, investment, retail sales and trade all grew less than expected last month, after the world's No. 2 economy put in a surprisingly strong showing in the first half, fuelling a global recovery.
But economists do not expect any hard landing, with the government keen to ensure stability ahead of a once-in-five-years Communist Party leadership reshuffle in the autumn.
"The upshot is that both foreign and domestic demand appear to have softened at the start of the third quarter," said Capital Economics' China economist Julian Evans-Pritchard. "A few sectors, such as steel, seem to have defied this slowdown in economic activity. But the strength in these areas likely won't last, given that policy tightening is set to further weigh on infrastructure and property investment in coming months."
Factory output rose 6.4 per cent in July from a year earlier, the slowest pace since January, according to data from the National Bureau of Statistics yesterday. Retail sales expanded 10.4 per cent year on year, compared with 11 per cent in June, while fixed-asset investment in urban areas rose 8.3 per cent from a year ago in the first seven months, versus a forecast 8.6 per cent rise.
All three indicators falling from strong June readings is "an initial signal of economic slowdown in the second half", said chief China economist Ding Shuang at Standard Chartered in Hong Kong. "It doesn't necessarily indicate a big shift in policies, since the readings aren't very bad, but slight adjustments are possible, especially in monetary policy."
The statistics bureau said the overheated property market has cooled "somewhat", but it still expected China's economic performance to be steady in the second half. The performance in July was stable, the bureau said.
STRENGTH IN SOME SECTORS BUT...
A few sectors, such as steel, seem to have defied this slowdown in economic activity. But the strength in these areas likely won't last, given that policy tightening is set to further weigh on infrastructure and property investment in coming months.
MR JULIAN EVANS-PRITCHARD, China economist at Capital Economics.
Growth of private investment also ebbed to 6.9 per cent in the first seven months of the year, suggesting small and medium-sized firms still face challenges in accessing financing. Private investment accounts for about 60 per cent of overall investment in China.
The Chinese economy faces some headwinds this year as the effects of deleveraging and industrial capacity cuts kick in, and those factors are beginning to show up in the hard data. With cooling property markets and uncertainty in the trade outlook, policymakers may refrain from tightening too aggressively to keep growth humming.