BEIJING • China reported a rare flurry of disappointing data yesterday - including its slowest growth in investment in nearly 18 years - suggesting the economy is finally starting to lose some momentum as borrowing costs rise.
Factory output and retail sales grew less than expected, though a rebound in property sales and construction starts is likely to keep China's overall growth relatively robust and on target ahead of a leadership reshuffle next month.
"The risk (for China) isn't in the next couple of months, but rather the next couple of years," said Capital Economics' Julian Evans- Pritchard. "Progress on key structural reforms that really matter, such as boosting the performance of state-owned enterprises, has been quite slow and the structural drags on growth remain quite strong and are real risks."
Analysts had widely expected China's August data to fit into a pattern of stronger-than-expected readings from China in the first half of the year and upbeat surveys on August factory activity. A year-long, government-led construction boom has lifted demand and prices for everything from cement to steel, helping to offset an expected drag from property curbs and a crackdown on riskier types of financing.
But August's data suggested the boost from Beijing's infrastructure building spree may be starting to fade. Fixed-asset investment, a key growth driver for the economy, grew 7.8 per cent in January-August from a year ago, the weakest pace since December 1999 and cooling from 8.3 per cent in January-July.
The main drag appeared to be a slowdown in infrastructure investment due to a significant drop-off in government fiscal spending over the past two months, analysts said.
Industrial output rose 6 per cent in August year on year, the weakest pace in nine months, statistics bureau data showed.
Despite measures which have largely succeeded in cooling red-hot housing prices, activity in the property market snapped back in August growing 7.8 per cent year on year, possibly as developers turn to smaller cities with fewer restrictions. Retail sales also confounded market expectations, rising 10.1 per cent in August year on year, the slowest pace in six months.
Other data for August released last week was mixed, with imports beating expectations - pointing to still solid domestic demand, while exports grew less than expected. Producer and consumer inflation quickened more than forecast.
Foreign direct investment in China fell 0.2 per cent in the first eight months of the year from a year earlier to 547.94 billion yuan (S$112.7 billion), Commerce Ministry data showed.