China’s Slowdown Deepens

China’s economic slowdown deepened with unexpected decelerations in industrial-output and investment growth and a decline in home sales, testing policy makers’ reluctance to step up monetary stimulus.

Factory production rose 8.7 percent in April from a year earlier, the National Bureau of Statistics said in Beijing, compared with the 8.9 percent median estimate of analysts surveyed by Bloomberg News. Fixed-asset investment increased 17.3 percent in the first four months of the year, the slowest for the period since 2001, and home sales fell 9.9 percent.

The figures signal risks are increasing that China will miss the year’s expansion goal of about 7.5 percent, as the government’s efforts to counter the slowdown, including tax breaks and spending on railways and housing, have yet to gain traction. The central bank said today it told banks to approve home mortgages in a timely manner, amid a cooling in the property market.

“If the government wants to keep the growth rate around 7.5 percent, the next step is definitely substantial easing in monetary policy,” said Xu Gao, chief economist at Everbright Securities Co. in Beijing, who formerly worked at the World Bank. He said he expects an across-the-board cut in banks’ reserve-requirement ratio by the end of June.

The Shanghai Composite Index (SHCOMP) fell 0.1 percent at the close, while the yuan strengthened 0.1 percent to 6.2302 at 4:07 p.m. local time.

Bloomberg

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