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Economy

Economy remains sluggish in April

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2015-05-14 08:41Shanghai Daily Editor: Wang Fan

China's economy continued to weaken in April, with retail sales and bank loans slowing, money supply growing at a record low, infrastructure spending most sluggish in 15 years, housing starts plummeting and industrial production missing forecasts.

All up, the monthly figures from the National Bureau of Statistics hardened the image of what is now called the "new normal" and fueled expectations that the government will take even more dramatic steps to meet its 7 percent growth target for this year.

"It's worse than what most people had expected, especially on the investment side," Louis Kuijs, China economist at Royal Bank of Scotland in Hong Kong, told Reuters.

"All of this suggests that the downward pressures on growth in China are persisting."

The bureau reported yesterday that growth of fixed-asset investment — a measure of spending on roads, bridges, airports and other public works projects — slowed to 12 percent in the first four months — its weakest pace since 2000.

Industrial production in April rose 5.9 percent from a year earlier, slower than economists predicted. Retail sales rose 10 percent to 2.23 billion yuan (US$359 million), slipping from a 10.2 percent gain in March.

"This set of data suggests that growth in the first month of the second quarter could have slowed to below 7 percent," said Zhou Hao, an economist at Australia & New Zealand Bank.

"More growth stabilization policies can be expected to get rolled out," he said.

On Sunday, the central bank cut interest rates for the third time in six months as authorities tried to shore the 7 percent pace of growth reported for the first quarter. It also reduced the ratio of deposits banks have to hold in reserve.

Still, money supply growth in April slowed to a record low of 10.1 percent, and new bank loans of 708 billion yuan were a fifth lower than expected.

"The property sector remains the biggest drag on the economy," Nie Wen, an economist at Hwabao Trust, told Reuters.

Investment in property slowed to 6 percent growth in the first four months of the year, its weakest level since 2009, and new property construction fell 17.3 percent.

Zhu Haibin, an economist at JPMorgan, predicted China will step up efforts to revive its trade, manufacturing, investment and consumption sectors.

"We expect the central bank to use a mixture of traditional and innovative targeted measures," Zhu said.

"Tools such as offering local government bonds will likely play a more important role than before," he said.

The NBS managed to find a few bright spots in its April data. It said online sales surged 40.3 percent in the first four months, while strong growth was also recorded in the manufacture of automobiles, digital equipment and machinery.

Premier Li Keqiang has proclaimed a "new normal" of slower expansion in China's economy, but he and other leaders won't want growth so subdued that it stunts job creation and risks defaults on hefty local government debt.

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