Beijing should not take any chances with the slowing economy

The recent boost to monetary and fiscal easing is a step in the right direction, but more action is needed, given the mounting risks

With stable financial markets, and bold measures in the US and Europe, expectations are growing for China to cut taxes and interest rates, and provide support for infrastructure investments and consumption subsidies

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The People's Bank of China may well cut the reserve requirement ratio for banks in the fourth quarter. Photo: Reuters

Published: 1:00pm, 25 Sep 2019Updated: 10:54pm, 25 Sep 2019

Pollution curbs ahead of China’s 70th anniversary celebrations may well have contributed to the disappointing August economic data released recently, but there’s no denying that growth momentum remains weak. And that calls for more policy easing from Beijing.

Industrial production growth, which suffered a steep drop in July, fell further, to 4.4 per cent year on year in August, making it the biggest disappointment in the latest numbers. This would seem at odds with the improved producer price index, decent figures for the purchasing managers’ index, and reasonable credit growth.

But that can be put down to pollution controls ahead of the October 1 celebrations: production curbs in heavy industries, which are concentrated in the provinces and municipalities surrounding Beijing, have caused visible dents in industrial output around this time in previous years.

Unsurprisingly, the largest contribution to last month’s industrial production weakness was mining, where year on year growth has almost halved, to 3.7 per cent. This weakness is expected to continue in September, before unwinding at least partially in October after production controls are lifted.

But while industrial production weakness can be taken with a pinch of salt, there are plenty of genuine signs elsewhere of deepening economic woes. Trade remains the worst-hit area of the economy, thanks to the recent escalation of tariffs.

Export shipments to the United States tumbled 16 per cent in August, driven down by goods on the US$250 billion tariff list. US President Donald Trump has announced a symbolic two-week delay in the new tariffs, originally set for October 1.