China's investment growth may have hit bottom, say analysts
But hopes rise as experts expect expansion to pick up after easing policies
The mainland's investment growth slumped to its lowest in more than a decade, but hopes are rising that economic expansion has bottomed, thanks to Beijing's latest efforts to ease local governments' debt burden and pump in liquidity, analysts say.
Fixed-asset investment growth slowed to 12 per cent in the first four months of the year from a year earlier, compared with a 13.5 per cent year-on-year expansion in the first quarter, the National Bureau of Statistics said yesterday.
That put April's investment growth at less than 10 per cent, the first single-digit growth since 2003. Property investment growth almost stalled last month. Industrial output picked up only slightly to 5.9 per cent in April from 5.6 per cent in March.
The Shanghai stock market slipped 0.58 per cent yesterday despite soaring real estate shares. The Hong Kong stock market also fell 0.58 per cent.
Central bank data shows lending has slowed, with new yuan loans falling to 708 billion yuan (HK$897 billion) last month, down from the 1.2 trillion yuan extended in March.
But the worst may be over. The central bank may cut interest rates further after making the third reduction in six months this week. These measures, along with tax cuts and other fiscal steps, will stabilise economic growth ahead, analysts say.
"We believe that economic growth should have touched a bottom in April," Morgan Stanley Huaxin Securities' senior economist Steven Zhang said.
"As pro-growth policies are rolled out further in the second quarter while more lagging effects of policies are displayed, economic growth is likely to rebound moderately."
In particular, infrastructure investment may get a push after Beijing removes an overhang on local governments' debt-for-bond swap programme.
The Ministry of Finance asked local authorities to issue longer-term, lower-yield municipal bonds to replace one trillion yuan of existing debt to try to ease their debt burden. But the bonds have appeared unpopular because of low returns.
Beijing's latest solution to the problem, as reported by state media this week, is to allow banks to use municipal bonds as collateral to obtain more liquidity from the central bank. The plan would give banks more incentives to buy those bonds.
"Local governments have promised no default, banks will receive lower yields, and the central bank has committed to provide cheap funding," Citigroup economist Shen Minggao said.
The mainland's gross domestic product growth slumped to a six-year low of 7 per cent in the first quarter. Retail sales grew 10 per cent in April, down from 10.2 per cent in March, although online sales surged by 40.9 per cent in the first four months.
