Beijing - China’s economic activity showed across-the-board weakness last month, with data ranging from output to investment and consumption all missing market expectations.
Months of lacklustre performance and growing signs of weakness in the housing market have led some analysts and investors to question whether more stimulus is needed lest economic expansion this year fall short of the official target of about 7.5 percent.
The central bank asked commercial banks on Monday to speed up the granting of home loans and to set mortgage rates at reasonable levels, sources said, underscoring concerns that any sharp deterioration in the property market could put further strain on the economy.
The most concerning figure is for fixed asset investment, which grew 17.3 percent in the first four months from a year earlier, the weakest pace since the government started a new statistics method in 2011.
April industrial output also disappointed, growing 8.7 percent from a year earlier versus market consensus for a rise of 8.9 percent. Retail sales missed forecasts, rising 11.9 percent in the same period, the statistics bureau said yesterday.
“If the government still views that achieving a 7.5 percent growth target is important for its credibility, China’s monetary policy will have to play its necessary role by easing further in order to help pull the economy out of a state of lethargy,” Liu Li-Gang and Zhou Hao, economists at ANZ, said in a note to clients.
Beijing has unveiled a slew of targeted measures this year to help shore up the economy, which is on track this year for its weakest showing in 24 years.
The measures include faster investment in railway and shanty town construction, easing reserve requirements for rural banks and tax breaks for smaller firms.
But economists said the steps were not dramatic enough to arrest the deceleration in the economy, especially at a time when the slowing property market added a significant new risk.
The fixed asset investment number “basically tells us the housing downturn has more than offset the investment push from the government so far”, said Wei Yao, Société Générale’s China economist in Hong Kong.
Revenues from property sales fell 7.8 percent in the first four of months of the year compared with the same period last year, yesterday’s data showed.
The property sector directly affects about 40 other industries in China and is considered a crucial economic pillar.
“April’s transactions in Shanghai were around 20 percent lower than March. Looking at the momentum now, April may not be the bottom yet. May and June could still be on a downtrend,” Clement Luk, the chief executive for east China at Hong Kong-based Centaline Property, said.
Analysts’ calls for an easier monetary stance seem to run counter to recent comments by policymakers, who have ruled out massive policy loosening, such as a universal cut in banks’ reserve requirements.
In response to speculation that authorities might lower reserve requirements for banks to spur growth, central bank governor Zhou Xiaochuan said on Saturday that the government would not use any large-scale stimulus.
Separately, an academic adviser to the monetary policy committee repeated yesterday that there would be no big adjustment in monetary policy because Beijing had to wait for more data in coming months.
Top Chinese leaders have flagged on many occasions that they would tolerate slower growth while they pushed ahead with structural reform.
In the latest indication of Beijing’s determination to push reforms, President Xi Jinping said last week that the country must adapt to a “new norm” of economic growth and keep “cool-minded” amid a slowing economy. He also pledged to continue to co-ordinate efforts to stabilise growth. – Reuters