- China’s economic recovery is being weighed down by a worsening property slump, with latest data likely to show little sign of a rebound in growth.
The weak data will likely put pressure on Beijing to add more monetary or fiscal stimulus after a fairly muted response from officials so far. However, economists say a weak yuan and high debt levels are holding policymakers back from taking stronger action, with stimulus this year likely to lag the steps taken during previous downturns.
China’s National Bureau of Statistics is expected to release July economic data on Tuesday at 10am local time. Here are some of the key factors to watch:Property investment likely contracted further in July, taking the decline in the first seven months of the year to 8 per cent compared with the same period last year, according to economists surveyed by Bloomberg. That’s a worsening from the 7.9 per cent drop in the first six months of the year.
“We think the pressure along the real estate value chain such as sales, land acquisition and construction may continue to weigh on economic growth,” China International Capital Corp. analysts including Zhang Wenlang wrote in a note last week.Fixed-assets investment, which includes investments in property, infrastructure and manufacturing, is projected to increase 3.8 per cent in the January-July period, the same pace as in the first half of the year.
Factory production was also affected last month by deadly flooding in the country’s southwest and more recently in the northern regions, which disrupted logistics, forced people to evacuate and shut down mines. Extreme heat also threatened cotton supply, which is key for the textiles sector, and prompted some regions, which are reliant on hydro power, to curb energy supplies to high-consuming industries such as cement and steel.The jobless rate for people aged 16 to 24 hit a record of 21.
It’s also likely to roll over the 400 billion yuan of maturing MLF loans - the largest amount since January - and make a small net injection of 10 billion yuan into the financial system, economists forecast.