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China investment growth hits 18-year low

Reuters / Khmer Times Share:
A Chinese employee working on bicycle parts at a factory in Lianyungang. AFP

BEIJING (Reuters) – China posted a rare flurry of disappointing data yesterday – including its slowest growth in investment in nearly 18 years – suggesting the world’s second-largest economy is finally starting to lose some momentum as borrowing costs rise.

Factory output and retail sales also grew less than anticipated, though a rebound in property sales and construction starts is likely to keep China’s overall growth relatively robust and comfortably on target ahead of a key leadership reshuffle next month.

“I think the risk [for China] isn’t in the next couple of months but rather the next couple of years,” said Capital Economics’ Julian Evans-Pritchard.

“Progress on key structural reforms that really matter, such as boosting the performance of state-owned enterprises, has been quite slow and the structural drags on growth remain quite strong and are real risks.”

Analysts had widely expected China’s August data to show industrial output and retail sales growth had accelerated after fading slightly in July, while investment was seen as only marginally softer.

That would have fit into a pattern of stronger-than-expected readings from China in the first half of the year and upbeat surveys on August factory activity. A year-long, government-led construction boom has lifted demand and prices for everything from cement to steel to glass, helping offset an expected drag from property cooling measures and a regulatory crackdown on riskier types of financing.

But August’s data suggested the strong boost from Beijing’s infrastructure building spree may be starting to fade.

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