China May economic data complicates future policymaking (3)

20:36, June 11, 2010      

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Growth of factory production and fixed-asset investment contracted, illustrated by slower growth of auto sales and a cooldown in the property market, government data showed.

Chinese auto sales in May rose 28.35 percent from a year earlier, but the figure was down 7.5 percentage points from April. The property market saw slower growth in property prices at 12.4 percent in May from April's 12.8 percent, and a decrease of floor space sold due to government tightening measures.

Moody's Analytics said in a note that reduced bank lending was crimping business investment, while infrastructure investment was starting to ease as government projects were completed.

"With this trend in place and Chinese authorities actively working to cool growth amid emerging inflation pressures, fixed investment is expected to play a smaller part as a driver of economic activity later this year," according to the note.

It also said slower industrial output growth was in response to gradual tightening measures, adding "this is not necessarily a bad thing. The apparent moderation in industrial production growth will help to contain these inflationary pressures."

The gradual and orderly deceleration to date provides hope that Chinese policymakers would be able to engineer a soft landing and prevent the economy from imploding, it said.

China's domestic demand remained robust, as retail sales, another major driver of the country's economy, quickened its growth to 18.7 percent in May from 18.5 percent in April.

Experts attributed the growth to a series of incentives, including subsidies and tax breaks for home appliances and cars.

Exports also staged a strong growth in May surging 48.5 percent from a year ago in May, faster than the 30.5 percent growth in April.

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