Factory production rose 8.8 percent in May from a year earlier, the National Bureau of Statistics said in Beijing today, up from 8.7 percent in April. Retail sales increased 12.5 percent and January-May fixed-asset investment growth was little changed at 17.2 percent.
Today’s reports may bolster Chinese leaders’ confidence that so-called mini-stimulus measures will prevent a deeper economic slowdown. Even so, policy makers are contending with a property market slump, along with risks from shadow banking and rising bad loans that threaten to limit the scale of a recovery.
“The data confirms stabilization of economic activity and even a modest improvement on the manufacturing side,” said Dariusz Kowalczyk, senior economist at Credit Agricole SA in Hong Kong. “Unfortunately, home sales by area contracted sharply, highlighting continued weakness of the real-estate sector and the risks it poses to overall growth.”
Home sales in the first five months fell 9.2 percent from a year earlier by area and dropped 10.2 percent by value, the statistics bureau said today. Property investment in the January-to-May period rose 14.7 percent, down from a 16.4 percent pace in the first four months.
Stocks in China held their gains after the data. The benchmark Shanghai Composite Index (SHCOMP) closed 0.9 percent higher, taking the gauge to its biggest weekly advance in two months.
The yuan’s spot rate climbed as much as 0.27 percent today to a two-month high of 6.2020. The central bank has strengthened the daily reference rate against the dollar by 0.2 percent from June 6, the biggest weekly advance this year, a gain Bank of America Corp. strategists say is consistent with the stabilization in China’s economic data.
The increase in May industrial output matched the median estimate in a Bloomberg News survey of economists. The advance in retail sales compared with the median projection of 12.1 percent and an 11.9 percent gain the previous month.
The median estimate for January-May fixed-asset investment excluding rural households was for a 17.2 percent increase after a 17.3 percent gain in the first four months. New property construction fell 18.6 percent by area after a 22 percent drop in the first four months, the data showed.
Services investment is helping counter a slump in real estate. JD.com Inc. (JD) China’s second-largest e-commerce site will spend $1 billion to $1.2 billion over the next three years to buy land, build new warehouses and purchase vehicles for shipping and delivery, the Beijing-based company said in a stock exchange filing last month.
The State Council has announced a series of policies to support the economy since April after first-quarter gross domestic product growth slowed to 7.4 percent, the weakest pace since 2012. The measures include help for exporters, tax cuts, faster fiscal spending and a reduction in reserve requirements for some banks to spur lending to targeted sectors.
This week, the executive body offered more public investment in transport infrastructure in the Yangtze River basin and lower taxes for some utility companies.
“In the next few months, the mini-stimulus from April and May will support investment,” said Hu Yifan, chief economist at Haitong International Securities Group Ltd. in Hong Kong. “The momentum is starting to show but it’s still pretty weak and we will need more targeted mini-stimulus to stabilize the economy.”
Fiscal spending increased very quickly in May which is “great evidence that infrastructure projects have increased,” she said. Ministry of Finance data released this week showed May fiscal expenditure rose 24.6 percent from a year earlier, compared with a 9.6 percent increase in the first four months.
The central bank has also moved to rein in shadow banking risks and encourage credit to move through the official banking sector.
New yuan loans in May were 870.8 billion yuan, the People’s Bank of China said yesterday, higher than 42 out of 43 analyst estimates in a Bloomberg survey. They accounted for 62.2 percent of aggregate financing, China’s broadest measure of new credit, up from 50 percent in April and 56.1 percent a year earlier, as regulators curbed some interbank business and off-balance-sheet lending.
The State Council ordered eight inspection teams to carry out nationwide checks on local governments to ensure they are implementing the government’s easing policies and reforms, the Xinhua news agency reported June 7. Officials who haven’t fulfilled their duties will be punished, it said.
“China’s policy easing has become significant from a macro perspective,” Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong, said in a note after the data. “We continue to expect further easing measures in the next few months” that will lead economic growth to “rebound slightly” to 7.5 percent in the third quarter from an estimated 7.4 percent in the current three-month period, he said.
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