Growth in China’s economic activity slowed dramatically in July with factory production, investment and consumer spending all coming in below forecast amid a national drive to tackle rising debt.
The momentum of the first half fizzled away last month after the country’s leadership listed financial risks as major threats to the health of China’s US$11 trillion economy.
A slowdown in property investment and home sales, along with an easing in overseas shipments, point to further weakness down the road as President Xi Jinping seeks to cement his power at a key Communist Party congress this year and push ahead with long-delayed economic restructuring.
Yao Wei, chief China economist at Societe Generale, said Beijing’s efforts to curb risks would be clearer after the congress and this was a fundamental reason to be cautious about growth in China.
“Deleveraging and lowering risk in the financial system are now clearly among the top medium-term objectives of the Xi administration,” Yao said.
She said China’s “cyclical peak is behind us” even though a sharp and sustained slowdown was unlikely.