Sunday , July 22 2018
Breaking News
Home / International Customs / China / China’s economy losing some steam as investment growth hits 18-year low
China’s economy losing some steam as investment growth hits 18-year low

China’s economy losing some steam as investment growth hits 18-year low

BEIJING: China posted a rare flurry of disappointing data on Thursday — including its slowest growth in investment in nearly 18 years — suggesting the world’s second-largest economy is finally starting to lose some momentum as borrowing costs rise. Factory output and retail sales also grew less than anticipated, though a rebound in property sales and construction starts is likely to keep China’s overall growth relatively robust and comfortably on target ahead of a key leadership reshuffle next month. “I think 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 show industrial output and retail sales growth had accelerated after fading slightly in July, while investment was seen as only marginally softer. That would have 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 to glass, helping offset an expected drag from property cooling measures and a regulatory crackdown on riskier types of financing. But August’s data suggested the strong boost from Beijing’s infrastructure building spree may be starting to fade. Fixed-asset investment, a key growth driver for the world’s second-largest economy, grew 7.8 percent in January-August from a year earlier, the weakest pace since December 1999 and cooling from 8.3 percent 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.

China frontloaded fiscal spending this year to produce rosy growth ahead of the once-in-five-years Communist Party Congress next month, Evans-Pritchard said. But local governments are constrained by annual budgets and have had to pare back spending in the second half of this year, he added. That likely had a knock-on effect on industrial output, which rose 6.0 percent in August on-year, the weakest pace in nine months, statistics bureau data showed. Analysts polled by Reuters had predicted output would grow 6.6 percent in August, up from 6.4 percent in July. The statistics bureau said unusually hot and wet weather weighed on industrial output last month, adding that the economy remained on a steady, improving trend. On a monthly basis, output rose nearly half a percent. China’s crackdown on pollution may have also dented industrial output, as Beijing looks to close older, smog-belching mines and factories, said Nie Wen, an economist at Hwabao Trust in Shanghai. Still, economists at Nomura maintained their view that the economy would expand 6.8 percent in the third quarter from a year earlier, easing only slightly from 6.9 percent in the first half.