China Economy Remains Strong

China Economy Remains Strong

Industrial output, a gauge of the activity of large enterprises, grew 6 percent year on year in August, down from the 6.4-percent pace a month earlier and retreating to the lowest level this year. Fixed asset investment fell short of expectations with a 7.8-percent rise in the January-August period, the weakest since 1999.

Retail sales rose 10.1 percent last month, lower than market estimates of 10.5 percent and July’s 10.4-percent rate. Private investment and property sales also registered slower growth.

Thursday’s data came after a strong economic rebound that features forecast-beating GDP expansion in the first two quarters and aroused concerns over the growth impetus of the economy.

Bloomberg chief Asia economist Tom Orlik said in an e-mail that the data showed “a slightly sharper-than-expected loss of momentum,” adding that headwinds against the economy are significant.

China still faces lurking problems and challenges” from external uncertainties and domestic transformation, NBS spokesperson Liu Aihua said at a press conference, but dismissed worries that the lackluster performance will linger for the remainder of the year.

“Short-term volatility can be triggered by non-economic factors, such as weather and comparison bases, and does not represents the overall trend,” Liu said, adding that high temperatures and more rainfall disrupted factory activity this summer.

Employment was stable and inflation was under control. The surveyed unemployment rate in 31 cities was under 5 percent last month and consumer prices rose 1.8 percent. Industrial enterprises saw their profits improve substantially in the first seven months.

“The economy still stayed within a reasonable range,” Liu said, predicting stability in the second half. China has targeted an annual economic growth of around 6.5 percent for 2017, down from the 6.7 percent pace recorded in 2016.

The NBS data also pointed to solid progress in the country’s economic rebalancing and industrial upgrades.

With old growth engines losing steam, China is pressing forward with a new model of economic development that draws strength from consumption, services sector and innovation.

Services maintained rapid expansion in August, with revenues of information and rental services logging double-digit growth.

Investment into high-tech sectors jumped 19.5 percent in the first eight months, while the environmental protection industry saw investment up by 28.2 percent.

The output of industrial robots surged 63 percent in the January-August period, and 25 percent more new energy vehicles rolled off assembly lines.

“In the details, there were some positives for China’s reform and rebalancing story, with most of the slowdown in production coming from investment and output of old-line industries,” Orlik said.

China has made headway in downsizing saturated sectors. Around 128 million tonnes of excess coal capacity was eliminated during the January-July period, while shoddy steel products were banned.

Economic adjustments continued with improvements in quality and efficiency, Liu said.

The following two tabs change content below.
S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

Latest posts by S. Jack Heffernan Ph.D (see all)

You must be logged in to post comments :  
CONNECT WITH