China: Output growth plunges to lowest in five years

Easy monetary policy suggested to stop deceleration.


Afp September 14, 2014

BEIJING:


China’s industrial production growth slowed sharply to its lowest level for more than five years at 6.9% in August, intensifying concerns for the world’s second-largest economy.


The key indicator measuring output at factories, workshops and mines, slumped from a 9% year-on-year expansion in July and was the worst since 5.7% in December 2008, during the global financial crisis.

Retail sales, an indicator of consumer spending, rose 11.9% in the same month year-on-year, also down from 12.2% in July. Fixed asset investment, a measure of government spending on infrastructure, expanded 16.5% on-year in the first eight months of 2014.

It was below the 17% reading for the first seven months of the year and also below the 16.9% forecast.

China’s Communist Party government is targeting an expansion of about 7.5% in gross domestic product (GDP) this year to steer the country’s growth model towards consumer spending and away from exports.

“Past experience suggests that China needs to maintain around 9% industrial production growth to deliver 7.5% GDP growth,” ANZ Bank economists wrote in an analysis.

“Chinese authorities should further relax monetary policy as soon as possible to prevent the growth momentum from decelerating further,” they added.

Since April, authorities have deployed measures to boost growth, including small business tax breaks, targeted infrastructure spending and incentives to spur lending in rural areas and to small companies.

Recent concerns have centred on fallout for the economy from a potentially damaging knockdown in China’s huge property sector, where new home prices have fallen for four straight months.

A plunge in bank lending in July had also raised fears of slowing economic growth, though figures for August showed a strong rebound to what analysts described as approaching a normal level.

Chinese banks granted 702.5 billion yuan ($114.5 billion) in new loans last month, the People’s Bank of China said, nearly twice July’s 385.2 billion yuan though still below June’s 1.08 trillion yuan and lower than the amount recorded in August 2013. 

Published in The Express Tribune, September 14th, 2014.

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COMMENTS (2)

truthbetold | 7 years ago | Reply

China's GDP depends heavily on exports, especially to the US. The US can turn the tap off anytime and it will severely depress the chinese economy. It was due to US investments started by Nixon that China's GDP grew. American companies invested heavily in China to take advantage of dirt cheap labor. This gave China a sound manufacturing base to build on.

Emerson Lee | 7 years ago | Reply

As US is on the economic recovery slope, China is experiencing its share of lackluster economic trend. This is not a welcome news to us as we are counting on our exports to equalize the trade imbalance.

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