Mainland economic activity slows
Sluggish data on real estate investments suggests that investors were jumping the gun when betting on a surging economic rebound
A shock fall in the mainland's broadest measure of credit in the economy and sluggish data for real estate investment in July flagged the risk that investors have got too optimistic too soon about the strength of a burgeoning economic rebound.
Economists say the performance will add pressure on Beijing to ease policy further to consolidate a still fragile economic rebound, while some expect growth will be sustained on fresh infrastructure investment.
"The slight growth rebound seen in the second quarter appeared short-lived, as the economy lacks momentum for sustained fast expansion," said Peng Xingyun, a senior researcher at the Chinese Academy of Social Sciences.
The Shanghai Composite Index recouped earlier losses to close 0.1 per cent higher as investors speculated on further easing steps to come. Hong Kong's benchmark share index finished at its highest in more than 31/2 years, with the Hang Seng Index ending up 0.8 per cent at 24,890.34 points, while the China Enterprises Index of the leading offshore Chinese listings in Hong Kong rose 1.2 per cent.
"If investment growth slows further with a property market downturn hitting more cities," a cut on interest rate or "a slight reduction" on overall banks' reserve requirement ratio cannot be ruled out, Peng said.
New yuan loans issued in July slumped to 385.2 billion yuan (HK$484.9 billion), which may be a temporary fall back from a peak of 1.08 trillion yuan in June, but economists say it also reflects slow industrial demand.