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Chinese economic data expected to remain fragile
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CHINA’S economic data for August may point to some stabilization due to recent policy measures but the overall performance is likely to remain weak, analysts said before the release of key activity data this week.
“We expect the upcoming August data to post less unfavorable headline for year-on-year growth of real activities due to policy measures though the underlying momentum may continue to struggle,” said Wang Tao, an economist at UBS.
Lian Ping, chief economist at the Bank of Communications, said the cuts in both interest rates and reserve requirement ratios last month have helped to boost market liquidity along with other policy moves such as supporting infrastructure projects and a streamlined red tape.
But analysts said the overall performance will continue to be weak as the economy is troubled by corrections in the stock market that have slashed the value of turnover as well as the distortions caused by factory closures ahead of the military parade in Beijing last Thursdsay.
Wang said UBS “sees risks” to its 6.9 percent growth forecast for the third quarter and 6.8 percent for 2015.
China’s economy surprised the market by growing 7 percent in the second quarter, above previous market hopes for a 6.8-percent rise that was below the full-year target of 7 percent.
But the data for trade, industrial production, retail sales and fixed-asset investment in the past two months all moderated, indicating the long-awaited recovery may be very short-lived.
Wang said that industrial production growth may have edged up as power generation grew 3 percent from a year earlier last month, while fixed-asset investment growth will likely have stabilized.
But exports and imports are seen to continue to contract.
“China’s foreign trade activity has weakened dramatically in recent months,” said Moody’s Analytics in a note. “The slowing domestic economy has cut imports, and may continue to do so.”
The Consumer Price Index, the main gauge of inflation, may rebound to 1.9 percent in August from July’s gain of 1.6 percent, according to analysts’ predictions.
But the growth in credit will improve as the central bank cut interest rates and bank reserve requirements last month to bolster the economy and stabilize the stock market. The interest rate cut was China’s fifth since November.
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