PLANT

China’s economic growth slows further

Country's trade weakens and the government has clamped down on credit boom


BEIJING – China’s leaders face new pressure to stimulate a slowing economy after growth fell to its lowest since 1991, hurt by weak trade and efforts to cool a credit boom.

The world’s second-largest economy expanded 7.5% over a year earlier in the three months ending in June, down from the previous quarter’s 7.7%, data showed Monday. Growth in factory production, investment and other indicators weakened.

The fifth straight quarter of growth below 8% is “a clear sign of distress,” said IHS Global Insight analyst Xianfang Ren in a report. With investment weak, she said the economy might be “at risk of stalling.”

Analysts said growth could fall further, adding to pressure on communist leaders who took power last year. They are trying to shift China from reliance on exports and investment to slower, more sustainable growth based on domestic consumption.

Chinese leaders are likely to launch new stimulus to hit their 7.5% growth target for the year, said Credit Agricole CIB economist Dariusz Kowalczyk. He said that might include weakening the Chinese currency to spur exports or pumping money into the economy through higher public works spending.

“We will see some targeted measures to stimulate growth,” said Kowalczyk. “They have to do something. Otherwise they will miss their target. And they cannot afford that, because this is their first year in power.”

A decline in Chinese economic activity could have global repercussions, denting revenues for suppliers of commodities and industrial components such as Australia, Brazil and Southeast Asia. Lower Chinese demand already has depressed prices for iron ore and other raw materials.

A stimulus would temporarily set back Beijing’s reform plans by reinforcing reliance on investment to generate jobs.

Growth in factory output slowed to 9.3% for the first half of the year, down 0.2 percentage points from the first quarter’s rate, the statistics bureau reported. Growth in investment in factories and other fixed assets in the first half declined by 0.8 percentage points to 20.1%.

Growth also has been dented by a crackdown on overly fast expansion in bank lending. Government efforts to tighten lending controls caused a temporary shortage of credit in Chinese financial markets last month.

Further efforts to rein in lending, especially unregulated private lending, could hurt entrepreneurs who generate most of the country’s new jobs and wealth.

©The Canadian Press