China’s economic growth remains stuck below the government’s target of about 7 percent this year, raising prospects for additional stimulus.
Bloomberg’s monthly gross domestic product tracker was at 6.64 percent last month, barely changed from July. Industrial output missed economists’ forecasts Sunday, while investment in the first eight months increased at the slowest pace since 2000.
In a juggling act that’s getting more complex by the month, authorities are seeking to cushion the slowdown, support the stock market, stabilize the yuan and press on with reforms to open up the world’s second-biggest economy. On Sunday, the government officially announced plans to reform state-owned enterprises, including by listing more of them, in another attempt to boost long-term growth.
“The economy still faces serious downward pressure," said Wang Tao, chief China economist at UBS Group AG in Hong Kong. "The government will have to redouble efforts in pushing infrastructure investment in the rest of the year to stabilize growth."
Five interest-rate cuts since November and plans to boost government spending have yet to revive an economy mired in a property slump, overcapacity and factory deflation.
The government’s plans for channeling more private money into SOEs and for managing state capital more efficiently, reported by the official Xinhua News Agency and previously detailed by Bloomberg on Sept. 8, leave scope for the largest overhaul of those businesses since the 1990s.
Such big-picture ambitions sit alongside the need for more immediate measures to support growth.
The finance ministry recently called for stronger fiscal policy to counter downward pressures. The country is raising the quota for a bond-swap program for regional authorities to 3.2 trillion yuan ($500 billion) to help ease debt pressure.
“From the perspective of monetary policy, the government has done what it can, but demand from the real economy needs to pick up to really make use of that,” said Ding Shuang, chief China economist at Standard Chartered Plc in Hong Kong.
“Now the government can only rely on fiscal policy," Ding said. "The dept-swap program can help relieve pressure, and the government needs to expedite the pace to approve investment projects."
August data released Sunday showed a challenging picture for policy makers. Fixed asset investment excluding rural households climbed 10.9 percent in the first eight months versus 11.2 percent median projection of economists surveyed by Bloomberg, falling short for a sixth time out of the last seven reports. Industrial output rose 6.1 percent in August from a year earlier, missing the 6.5 percent estimate.
Factory shutdowns in Beijing and surrounding provinces before a Sept. 3 military parade in the capital may also have contributed to the weaker-than-forecast output reading. Even with a lower base in the comparison to the year-earlier period, there still wasn’t much acceleration in output growth.
Premier Li Keqiang said last week that China can still maintain mid- to high-speed growth. Officials will press on with reforms to shift reliance from manufacturing and exports to services and consumption, he said Wednesday at a forum in the Chinese city of Dalian.
The 10.8 percent retail sales growth was the bright spot in Sunday’s data releases, beating the forecast of a 10.6 percent gain. Transactions picked up in part on higher food prices, signaling resilient consumption.
The retail sales data suggest that the stock-market slide won’t deal a blow to household confidence and dent consumption, according to a note Sunday by Bloomberg Chief Asia Economist Tom Orlik in Beijing.
"Robust spending on roads, waterworks, and other public projects is offsetting the slowdown in capital spending in real estate and manufacturing," Orlik wrote.
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