China Focus: Lackluster data point to further stimulus

BEIJING, June 9 (Xinhua) — A string of economic data released on Saturday showed China’s economy has not yet bottomed out from domestic and external jitters, fuelling calls for more stimulus measures to secure sound growth.

China’s industrial output grew at a slower-than-expected 9.6 percent year-on-year in May, rebounding 0.3 percentage point from April, the National Bureau of Statistics (NBS) announced Saturday.

Despite the slight pick-up, the reading still rest at a relatively low range and was not enough to curb the downward trend of the economy, analysts said, forecasting more actions from the government to spur growth.

Zhang Liqun, a researcher from the Development Research Center of the State Council, or China’s cabinet, said affected by slowing demand at home and abroad, the economic growth in May had generally extended a declining trend.

As the major indicators of domestic demand, China’s consumption and investment growth dropped further in May.

China’s fixed-asset investment rose 20.1 percent year-on-year to 10.89 trillion yuan (1.73 trillion U.S. dollars) in the first five months, marking the third consecutive monthly slowdown, while its retail sales grew 13.8 percent in May, down from the 14.1-percent growth registered in April.

“The May economic data comfirmed that China’s growth has not bottomed out, as was evidenced by the sooner-than-expected interest cut,” said Wang Jun, a researcher at the China Center for International Economic Exchanges.

To add fuel to the slowing economy, China’s central bank announced its first cut in benchmark interest rates in more than three years on Thursday, two days ahead of the release of the economic data, a sign that inflation, the economy’s major headache in the past few years, would not remain the government’s top concern.

In May, China’s consumer price index (CPI), a main gauge of inflation, slowed to a 23-month low of 3.0 percent from a year ago, weakening further from 3.4 percent in April and 3.6 percent in March.

Farm produce prices, an important part in the CPI calculation, fell for the fifth consecutive week in the week ending on June 3.

Meanwhile, the continuing declines of international commodities prices had lowered risks of imported inflation.

“The inflation pull-back has created more room for the government to pull policy levers to secure growth,” Zhang said.

Wang Yuwen, a researcher with Bank of Communications, estimated that inflation reading for the year at around 3.3 percent — well below the government’s target of 4 percent.

While growth has become the agreed focus in China’s current policy-making decisions, the goal will not be easy both in the short term and long run.

“Relying on investment to pull growth will have an immediate effect, but it will have negative repurcussions if not used rightly, while the consumption driver, though carries long-term value, is slow to boost economy,” said Zhuang Jian, an economist with the Asia Development Bank.

To buoy economic growth, China has approved an increasing number of large projects, which triggered concerns over blind expansion of investment.

Liu Shucheng, an economist with the Chinese Academy of Social Sciences, said the key is to optimize investment structure and diversify the funding sources, such as encouraging the private capital, which had recently been allowed to enter more areas, including railways, banks and logistics, to actively engage in the process.

Meanwhile, besides more cuts to the bank reserve requirement ratio to boost credit supply, the government will also push forward reforms in income distribution and structural tax reduction to boost spending, analysts said.

“Our growth-stimulating policies should be forward-looking,” Zhang said. <Xinhua>

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