Mainland economy starting to cool
In a sign that the world's second-largest economy is slowing down, the mainland's Purchasing Managers' Index (PMI) for the non-manufacturing sector fell two percentage points to 57.6 per cent in August from 59.6 per cent in July, according to the China Federation of Logistics and Purchasing (CFLP).
A PMI above 50 per cent indicates expansionary activity. The CFLP's non-manufacturing PMI is based on a survey of about 1,200 companies in 20 industries including transport, real estate, retail and software.
'Railway investment has started falling,' the CFLP said. 'The slowdown in investment in infrastructure construction is starting to make an impact. Construction activities and new orders have significantly dropped. This is the main reason for the fall in non-manufacturing PMI in August.'
The decline in rail investment had also hurt construction activity, the CFLP said. In August, the mainland's construction activity index was 63.2 per cent, a drop of 6.1 percentage points from July, while the index for new construction orders was 55.9 per cent, a plunge of 8.3 percentage points from July.
In the first seven months this year, fixed asset investment in railways fell to 276.2 billion yuan (HK$336.88 billion), according to the National Bureau of Statistics. This is the first time this year that the mainland's railway fixed-asset investment has recorded a year-on-year drop.
'Under the impact of the high-speed-train accident, approval of new rail projects and the pace of ongoing rail projects have slowed down,' the CFLP said. 'This will definitely be a blow to the construction market in future.'
After the accident in Wenzhou on July 23, the State Council on August 10 temporarily suspended all new railway projects.
Nearly half of the mainland's gross domestic product comes from investment, mostly in railways and other infrastructure, a trend that is unsustainable in the long term, said Diana Choyleva, director of Lombard Street Research, a UK think tank.
In August, the index for new orders on the mainland was 54.1 per cent, 1.5 percentage points lower than July, while the index for export orders was also 54.1 per cent, 2.4 percentage points lower than July.
The weakening of China's exports is mainly due to economic slowdown in the US, its biggest market. US rail traffic, an indicator of US economic activity, dipped 0.8 per cent year-on-year last week, according to the Association of American Railroads.
On the positive side, the mainland's inflation is stabilising. The input price index was 60.2 per cent in August, 2.9 percentage points lower than July, said the CFLP. 'This is a record low this year for the input price index. This indicates the price level is stabilising.'
Rail passenger throughput rose 10.1 per cent year on year to 178.6 million passengers in August, and rail freight throughput grew 5.7 per cent.
2.1%
This is how much fixed asset investment in railways on the mainland declined by in the first seven months of this year
