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Business News/ Politics / Policy/  China growth momentum stalls, investment growth hits record low
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China growth momentum stalls, investment growth hits record low

Spending by state-owned enterprises rise by the slowest pace since 2004

The economy is losing momentum just as China braces for a protracted trade conflict with the US. Photo: ReutersPremium
The economy is losing momentum just as China braces for a protracted trade conflict with the US. Photo: Reuters

Beijing: China’s economy hit a mid-year rough patch as efforts to curb risky lending and excessive debt collided with a deepening trade war. The economy is losing momentum just as China braces for a protracted trade conflict with the US. Officials have vowed to boost lending to smaller companies and support for infrastructure investment but it will take time for those measures to start having an effect. Today’s data and the slowdown in credit creation will increase pressure on the government and central bank to do more to support growth.

“The economy is slowing down as the result of the relatively tight policies in the past six quarters," said Gene Ma, chief China economist at the Institute of International Finance in Washington, who expects fiscal policy to be more supportive in the second half of 2018. “Tighter policies on shadow credit inevitably hurt small and private businesses. Rising trade tension started to hurt confidence, but not yet the real growth as exporters moved up their exports."

Private investment was still strong, rising 8.8% from a year earlier, the fastest pace since March. That compares with spending by state-owned enterprises, which rose by the slowest pace since data was first available in 2004. The trend looks set to continue, with the government increasing it’s monitoring of state firms as part of its continuing efforts to slow the increase in debt.

Infrastructure investment in the first seven months rose 5.7%, the lowest since at least 2014 and about a quarter of the pace in the same period last year. Property development investment grew 10.2% over the seven months.

“There was too much tightening" in the first half, as well as policy errors that ought to be corrected, Liang Hong, chief economist at China International Capital Corporation Ltd. in Beijing, said in an interview with Bloomberg TV. “Some of the policy adjustments just happened in July, so people are expecting in the third quarter we should see more stabilisation."

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Published: 14 Aug 2018, 11:49 AM IST
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