Economy slows down, but more sustainable

China's industrial growth slowed further in July as Beijing clamped down on credit and housing boom, but analysts do not believe the world's second largest economy to have a hard-landing.

Most of Chinese economists have confidence that the economy will grow more than 9.5 percent for 2010.

July Inflation spiked to its highest level of 3.3 percent rise this year as severe summer flooding wrecked crops and cargo transportation.

The government data Wednesday added to signs China's boom is cooling. But it isn't a clear signal that Beijing will reverse course to implement another stimulus plan.

A statistics bureau spokesman said the declines in economic indicators for July were "not big" and could be positive for official efforts to improve China's economic efficiency.

"The fall in economic indexes is mainly a result of the government's active macro-controls," said the spokesman, Sheng Laiyun, at a news conference. "Appropriate declines in economic growth are helpful to prevent overheating, and also are good for accelerating economic structural changes."

Economic growth slowed from a blistering 11.9 percent in the first three months of the year to 10.3 percent in the second quarter as Beijing rolled back a huge stimulus after China rebounded quickly from the global recession.

Chinese leaders say they want to steer growth to a more sustainable level.
A further fall in Chinese growth could have global repercussions if it hurts demand for U.S. and European factory equipment, industrial components from Asian economies and iron ore and other raw materials from Australia, Brazil and elsewhere, said a report from the Associated Press yesterday.

July growth in factory output slowed for a fifth month to 13.4 percent over a year earlier, its lowest level this year. Retail sales and investment in factories and other fixed assets also slowed.

The consumer price index, or CPI, rose 3.3 percent over a year earlier, its fastest rate this year as summer flooding wrecked crops and disrupted shipping. The jump was driven by a 6.8 percent surge in food costs.

Beijing wants to reduce reliance on exports and investment to drive growth by boosting domestic consumer spending and developing technology and service industries.

Private sector economists have lowered forecasts of China's growth this year due to the credit curbs but say it easily should meet the government's target of 8 percent.

Retail sales rose 17.9 percent, down from 18.2 percent growth for the first half of the year, said the National Bureau of Statistics.

An array of other indicators from manufacturing orders to auto sales also show that China's growth is steadily declining.

July housing prices held steady from June levels in a sign the government's lending curbs were working. But that easing has come at the cost of a slump in sales and construction.

The curbs have sharply cut bank lending. The central bank reported Wednesday that total lending by China's banks fell to 532.8 billion yuan, down nearly 12 percent from June's 603.4 billion.

Manufacturing also is under pressure from a government mandate to improve energy efficiency. The government this week ordered 2,087 steel and cement mills and other factories that are deemed too wasteful to close by the end of September.

Source: People's Daily Online / Agencies