WEAKER GROWTH IN CHINA

APRIL SHOWS NO SPRING IN CHINESE ECONOMY

Clifford Coonan

The Irish Times, May 12, 2012

LOWER THAN expected industrial output data in China, ebbing retail sales and weak growth in fixed asset investment, coming on top of weak trade data earlier in the week, combined to paint a gloomy picture for the world’s second largest economy.

“This is not good,” was the stark headline on UBS Bank’s weekly economic focus note, in which China strategist Wang Tao revised her overall GDP growth forecast for this year to 8.2 per cent from 8.5 per cent.

Industrial production for April slowed to 9.3 per cent year-on-year, its slowest annual pace since April 2009, on the back of decelerating exports and property investment, while fixed asset investment growth dipped to its lowest in almost a decade.

“The government’s effort on social housing and some infrastructure projects have so far not been sufficient to stop the overall economic slowdown,” wrote Ms Wang.

With export growth still in decline and downside risk in Europe and the global economy remaining, UBS believes the government may want to ease credit and fiscal policy further to support growth.

The weak growth in fixed asset investment indicated that the impact of a prolonged credit crunch in China’s property sector, and of flagging demand from export markets, was more severe than first thought.

New loans in April were well below what most observers had expected, helping to explain continued tight conditions for businesses and developers despite the gentle easing espoused by Beijing.

“Chinese trade and activity data for April show a weak start to Q2, while inflation data show a further easing in price pressures,” said Brian Jackson, senior emerging markets strategist at RBC Capital Markets in Hong Kong.

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