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Chinese economy stabilizes but risks still lurk
Source:Xinhua     September 29,2016



 

Chinese economy

 

Growth in China's August rail freight volume and a surge in industrial profits are among the encouraging data that reinforce a message of economic stabilization, analysts said, but risks remain.

 

In August, rail freight volume rose 0.1 percent year on year to 277million tons, reversing drops since September 2013, said the National Development and Reform Commission on Wednesday.

 

Tracking indicators of rail cargo volume, electricity consumption and bank lending used to be important alternative ways to measure the Chinese economy, Shanghai-based financial news and services provider WallStreetcn.com quoted Hua Chuang Securities' Qu Qing as saying in a report on Wednesday.

 

A total of 563.1 billion kilowatt hours of electricity was consumed last month, up 8.3 percent year on year. Growth accelerated from 1.9 percent a year ago and 8.2 percent in July.

 

Meanwhile, power production increased 7.8 percent year on year to 561.7 billion kilowatt hours. The momentum is expected to continue in September, according to Qu Yongzhong and Chen Yin from Northeast Securities.

 

Official data released Tuesday showed that China's industrial profits jumped 19.5 percent year on year to 534.8 billion yuan ($80.3 billion) in August, adding to signs of business stabilization.

 

The Chinese economy is shifting toward a growth model driven more by new engines such as consumer spending and services as policymakers tried to wean the economy from reliance on exports and investment.

 

Performance of the new growth engines has been even better than that of the old economic drivers.

 

China's consumer goods retail sales grew 10.6 percent year on year in August, accelerating from the 10.2-percent growth posted in July on the back of robust online sales. In the first eight months, the country's retail sales of consumer goods rose 10.3 percent year on year to 21 trillion yuan, according to the National Bureau of Statistics (NBS).

 

"New services, including online medical services, education and taxi-hailing are mushrooming," NBS spokesperson Sheng Laiyun said at a press briefing earlier in the month. Output in high-tech industries rose 11.8 percent from a year ago in August. New business registrations surged 28.9 percent in the first eight months.

 

Investment is also on a steadier path. China's fixed-asset investment grew 8.2 percent year on year in August, a huge increase from 3.9 percent in the previous month.

 

Amid encouraging data, overdependence on the property market, which risks causing asset bubbles, is still a major concern for the economy.

 

The property market has seen prices and sales increase substantially over the past months, boosted by growth policies such as interest rate cuts and lower deposit requirements.

 

The central bank data showed that M2, a broad measure of the money supply that covers cash in circulation and all deposits, had grown by 11.4 percent year-on-year as of the end of August.

 

M1, a narrower measure of the money supply, which covers cash in circulation and demand deposits, rose 25.3 percent year on year, almost on par with the previous month.

 

The spread between M2 and M1 growth narrowed to 13.9 percentage points from 15.2 last month, but was still elevated. The wide gap between M2 and M1 has fueled concerns about a "liquidity trap," in which companies remain wary of investing regardless of stimulus from policy makers.

 

Chinese banks made 948.7 billion yuan in net new yuan loans in August, more than double the figures from a month earlier and well above expectations, but most of the new loans were home loans rather than to support businesses.

 

Analysts warned policymakers to properly handle risks, including property bubbles and widening foreign debt, while remaining clear-headed about the downward pressure looming ahead due to uncertainties in the global economic recovery, including a possible interest rate hike in the United States.

 

China's economic growth held steady at 6.7 percent in the second quarter, the lowest level since the 2009 global financial crisis but still within the government's target range of 6.5-7 percent for 2016. Amid downward economic pressure, China has chosen to promote structural reform to put the economy on a more sustainable path.

 

(Source: Xinhua)

 

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