BEIJING • China's growth took a step back last month after a surprisingly strong start to the year, as factory output, investment and retail sales all tapered off following the authorities' clampdown on debt risks.
Due to the threat posed by cheap credit-fuelled stimulus, Beijing has tightened the screws on speculative financing in the past few months.
Data yesterday highlighted the broad economic impact of these regulatory curbs, with below-forecast factory output last month and fixed-asset investment in the first four months of the year reinforcing evidence of a weakening manufacturing sector and slowing momentum in the economy.
"If anything, (the slowdown) is even faster than we expected," said Capital Economics' Mr Julian Evans-Pritchard before the data was released. However, he added: "We're still some way off from the economy weakening to the point where it will test the tolerance of policymakers... as the urgency to address some of these financial risk issues (is even greater)."
Factory output was up 6.5 per cent last month from a year earlier, down from the 7.6 per cent rise in March, and fixed-asset investment rose 8.9 per cent in the first four months of the year, off the 9.2 per cent pace in January to March.
However, infrastructure spending continued to grow more than 23 per cent year on year in the period from January to last month, supported by Beijing's Belt and Road initiative.
China's central bank has been guiding short-term interest rates higher to help contain debt perils, though it is treading cautiously to avoid hurting economic growth.
A hot property market, fuelled by speculative investments, has been cited by analysts and policymakers as one of the biggest risks to growth. Yesterday's data showed investment in property development picked up last month, although sales growth was significantly slower, suggesting investment in the sector remained robust even as intensified controls take effect.
Retail sales rose 10.7 per cent last month from a year earlier, weaker than March's 10.9 per cent gain.
At the same time, growth in the service sector slowed to 8.1 per cent year on year, down from 8.3 per cent growth in March and the slowest since December. China's first-quarter economic growth came in at a faster-than-expected 6.9 per cent, on higher government infrastructure spending and a gravity-defying property boom.