China's slowdown intensifies with weak summer spending

Jake Cordell
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China is trying to shift away from manufacturing and heavy industry towards consumption and services
China is trying to shift away from manufacturing and heavy industry towards consumption and services (Source: Getty)

China's economic rebalancing hit another speed bump this morning as fresh data came in below expectations.

Growth in both the mighty industrial sector and consumer industries slipped back in July, highlighting the extent of China's struggle to maintain its breakneck expansion while also implementing structural reforms.

This morning the National Bureau of Statistics said investment in fixed assets increased by 8.1 per cent over the last 12 months, down from a rate of nine per cent and below expectations. Industrial production also missed analyst's forecasts by a whisker, growing by six per cent, down from 6.2 per cent.

The slowing of the country's heavy industry and weaker investment figures would not be a problem for central planners if it was accompanied by an expansion in consumption - a shift the government is actively trying to achieve.

However, figures overnight also showed that growth in retail sales nudged down in the year to July, increasing by 10.2 per cent compared to 10.6 per cent a month earlier. In yet further signs of oversupply, property investment slowed in July, falling from a rate of 6.1 per cent in June to 5.3 per cent.

The Chinese stats body said: "Due to serious disasters of flood and waterlog and high temperatures in certain areas of China as well as the weak demand from domestic and overseas market, some indicators witnessed slow-down in growth."

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"However, overall economic development kept performing," officials insisted.

Kit Juckes, macro strategist at Societe Generale said: "The Chinese economy is slowing slowly [and] is adding too much debt for the amount of growth it is creating." Augustin Eden, a research analyst at Accendo Markets said the figures bolstered the chances of the People's Bank of China (PBOC) joining the ranks of central banks launching monetary stimulus this year.

A Chinese government spokesperson said: "We will spare no efforts to stimulate market vitality, release growth potential and foster new driving forces so as to achieve stable and sound economic development."