China's economic growth may be losing momentum

A coal mine in the suburb of Tangshan in China's Hebei province. Data released yesterday showed the producer price index held gains, boosting steel mills, coal mines and heavy equipment makers.
A coal mine in the suburb of Tangshan in China's Hebei province. Data released yesterday showed the producer price index held gains, boosting steel mills, coal mines and heavy equipment makers.PHOTO: REUTERS

Latest data shows SMEs' confidence is down but financial market experts are optimistic

BEIJING • The first peek into China's economy this quarter shows momentum cooling slightly as a real-estate frenzy and months of producer-price gains may have peaked.

Confidence of small and me- dium-sized enterprises (SMEs), a gauge of manufacturing based on satellite imagery and a steel sentiment index edged down this month.

International financial market experts continued to be confident in the future of the economy, while a sales manager index remained elevated.

The economy expanded faster than expected in the first quarter, driven by surging factory prices and accelerating investment that defied last year's pessimism. Stricter property market curbs and slower producer-price gains cast doubt on the durability of the revival.

Standard Chartered's Small and Medium Enterprise Confidence Index eased to 58 this month from 60 in March. "The outlook turned less positive," economists Yan Se and Ding Shuang at the bank wrote in a note. "Tighter monetary policy and stricter financial regulations may continue to make SMEs' access to both bank and non-bank funding difficult."

The factory surge may have peaked, according to the China Satellite Manufacturing Index, which edged down to 51.3 this month from 51.8 last month. Readings above 50 signal improving conditions.

Data released yesterday showed industrial profits extended a surge, jumping 23.8 per cent in March from a year earlier, as the producer price index held gains, boosting steel mills, coal mines and heavy equipment makers.

A survey-based gauge of sales manager sentiment stood at 52, the highest level in 21 months, according to London-based research firm World Economics.

ZEW Panel Global financial market experts are increasingly optimistic about China's growth, according to a survey of China Economic Panel, a joint project of The Centre for European Economic Research (ZEW) in Germany and Fudan University in Shanghai.

The reading for expectations rose for the third month in a row to 17.1 in April from 14.2 in March, and a gauge for the current situation surged to 17.6 from 3.3, the most positive assessment since the introduction of the survey in 2013, according to the panel.

"We could see the Chinese economy move back into calmer waters with a return to the usual high growth rates," said Mr Michael Schroder, a senior researcher at ZEW.

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A version of this article appeared in the print edition of The Straits Times on April 28, 2017, with the headline 'China's economic growth may be losing momentum'. Print Edition | Subscribe