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China factories see slowest growth in 17 years

Beijing will surely step up policy easing measures to arrest the worsening slowdown.

Bloomberg|
Jun 15, 2019, 10.33 AM IST
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Officials have repeatedly said that the economy is strong enough to overcome the trade war and the central bank governor said recently he had “tremendous” room to adjust monetary policy if the conflict deepens.
China’s industrial output growth slowed to the weakest pace since 2002 and investment decelerated, highlighting the headwinds the economy is facing as it grapples with the US tariff war.

Industrial output rose 5 per cent from a year earlier, while fixed-asset investment expanded 5.6 per cent in the first five months. Both were slower than in April and below expectations. Retail sales was a bright spot, expanding 8.6 per cent compared to May last year, partly because a longer May Day holiday encouraged more tourism and spending.

Officials have repeatedly said that the economy is strong enough to overcome the trade war and the central bank governor said recently he had “tremendous” room to adjust monetary policy if the conflict deepens. This continued slowdown may encourage policymakers to use such capacity.

“Beijing will surely step up policy easing measures to arrest the worsening slowdown,’’ said Lu Ting, chief China economist at Nomura Holdings. “We expect Beijing to again allow local governments more freedom to scrap some restrictions in property markets to boost growth. We also expect Beijing to allow the yuan to depreciate further if the US government decides to impose the 25 per cent additional tariff on the remaining $300-billion list.’’ While the government and central bank have unveiled various targeted measures to boost infrastructure spending, support credit growth, cut taxes and increase consumption, so far they have avoided a massive stimulus plan like in previous downturns.

Investment Slowdown Fixed-asset investment by stateowned and private companies slowed, and there was a fall in investment in eight sectors, according to the data from the National Bureau of Statistics. While property investment slowed, it still grew 11.2 per cent percent in the first five months of the year, with that sector remaining a prop for the broader economy.

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