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Sluggish numbers

Figures point to growth faltering in China

Trade, inflation and new loans decline in May, raising pressure on Beijing to undertake measures to ensure more-sustainable growth

The mainland's trade, inflation and lending data for last month all showed a downward trend and trailed estimates, in more signs that weaker global and domestic demand will test the new leadership's resolve to forgo short-term stimulus for slower, more-sustainable growth.

Industrial production rose a less-than-forecast 9.2 per cent from a year earlier and factory-gate prices fell for the 15th consecutive month, National Bureau of Statistics data showed. Export gains were at a 10-month low and imports fell after a crackdown on fake trade invoices while fixed-asset investment growth slowed and new loans declined.

Premier Li Keqiang told provincial leaders on Saturday that while growth was still relatively fast and within a reasonable range and employment was stable, "complicated factors" were ahead and must be closely monitored.

At his summit with US President Barack Obama, President Xi Jinping said "we have full confidence in sustained and healthy long-term economic development" and that risks and challenges were controllable.

The sluggish data, nonetheless, adds to pressure on them to boost the numbers.

Consumer inflation slowed to 2.1 per cent, the lowest in three months, while producer prices fell 2.9 per cent, the lowest since September last year.

"The inflation data showed China's economic growth continued to slow. First-quarter growth is probably even slower than the second quarter's. In particular, the [producer price index] data showed very weak demand," said Shen Jianguang, the chief China economist at Mizuho Securities Asia in Hong Kong.

Mainland banks lent 667.4 billion yuan (HK$844.5 billion) in new loans last month, missing market expectations of 850 billion yuan and lower than April's 792.9 billion yuan. M2 money supply rose 15.8 per cent from a year earlier, slightly below a median forecast, while social financing, a measure of liquidity, was 1.19 trillion yuan, against 1.75 trillion yuan in April.

Despite the lower inflation, Bank of America Merrill Lynch said in a report it did not expect a cut in either interest rates or the required reserve ratio. It said the consumption demand lost in the first quarter could return in subsequent quarters.

Growth in retail sales, fixed-asset investment and industrial output met expectations at 12.9 per cent, 20.4 per cent and 9.2 per cent respectively, but the figures were little changed from the previous month.

On Saturday, data showed exports posted their lowest growth rate in almost a year in May while imports unexpectedly fell.

"The macro data for May confirms that the economy is stuck in stagnant growth again after quite a brief rebound," Ren Xianfang, a senior economist at IHS Global Insight, wrote in a note.

But Chris Leung, a senior economist at DBS Bank, said the general economic slowdown and lower credit creation were in line with the government's goals.

In more signs of slowing growth, passenger-vehicle sales rose at a slower pace last month. Wholesale deliveries of cars, multipurpose and sport utility vehicles increased 9 per cent to 1.4 million units, according to the China Association of Automobile Manufacturers. That compares with growth of 13 per cent in April and 13.3 per cent in March.

The slowing sales growth follows data showing average inventory levels at dealerships rose in April.

"Strong inventory building in the first four months and a softer GDP in the second quarter lead us to expect gradually slower sales growth for the rest of the year," Ole Hui, an analyst with Mizuho Financial Group, wrote in a research note.

This article appeared in the South China Morning Post print edition as: Figures point to growth faltering on the mainland
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