China’s economic growth accelerated in August, a batch of data showed on Tuesday, relieving pressure on policymakers to boost stimulus and assuaging fears of a sharp slowdown that would drag down global growth.
Industrial production, a gauge of the crucial manufacturing sector, grew 6.3 per cent annually in August, the fastest pace since March. Retail sales growth accelerated to 10.6 per cent in August, up from 10.2 per cent in July, led by auto sales, which rose 13.1 per cent.
Expectations had been rising that China’s central bank would cut interest rates before the end of the year to ensure growth momentum continued, but the latest positive data make further easing less likely, economists say.
“This was a strong set of data, showing improvement or stabilisation across all economic indicators,” said Tom Rafferty, head of Asia economics at the Economist Intelligence Unit. “The property market is proving surprisingly resilient as buyers step up purchases ahead of anticipated policy tightening, and this has acted to support the industrial sector and commodity prices.”
Tuesday’s figures add to previous signs that stimulus measures earlier in the year — including record credit growth in the first half and increased investment in infrastructure — have ensured that China will meet its full-year growth target for gross domestic product of 6.5 to 7 per cent.
China’s official purchasing managers’ index hit a 10-month high of 50.4 in August. Inflation data also showed producer price deflation narrowing to 0.8 per cent last month, the slowest pace of annual price declines in more than four years.
In the medium term, Chinese policymakers are attempting to guide the economy away from reliance on fixed-asset investment and towards consumption and services. They have cranked up infrastructure spending this year, however, as a tool to shore up short-term growth.
Unlike investment in new factories, building roads and railways does not exacerbate overcapacity in manufacturing — a major irritant in China’s relations with Europe, Japan and the US. But infrastructure spending still raises concerns over wasteful expenditure that adds to the country’s worrying debt load.
Many analysts had expected the People’s Bank of China would be forced to cut either benchmark interest rates, bank reserve ratios, or both this year to keep growth momentum going. But the latest data will enable policymakers to shift their focus to deleveraging and containing housing bubbles in major cities.
“August data ended the slowing trend and returned to acceleration, so we expect that overall economic growth held steady in the third quarter from the first half,” wrote Zhang Yiping, economist at China Merchants Securities in Beijing. “From the looks of it, the sliding down of growth isn’t nearly as disastrous as expected.”
Additional reporting by Ma Nan
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