China’s economy shows further signs of fatigue

China’s economy showed further signs of fatigue in November, with factory growth slowing more than expected and investment expansion hovering near a 13-year low, putting pressure on policymakers to unveil stronger stimulus measures.

A deluge of weak data this week has reinforced the view that annual economic growth may weaken from 7.3 per cent in the third quarter - already the lowest since the great financial crisis and further straining the fragile global economy.

A surprise interest rate cut by China’s central bank last month signalled policymakers’ growing concern that the world’s second-largest economy may be at risk of a sharper slowdown that could fuel job losses and debt defaults.

"The data bodes ill for GDP growth in the fourth quarter, which is bound to slow further," said Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong.

“It will put pressure on policymakers to ease monetary stance again and we expect an RRR cut still in December,” he said, referring to a reduction in banks’ required reserve ratios (RRR) which would, in theory, encourage more lending. Factory output rose 7.2 per cent in November from a year earlier, slowing from October’s 7.7 per cent, the National Bureau of Statistics said today.

The reading missed analysts’ forecasts of 7.5 per cent and marked the second lowest expansion since the depths of the global crisis in December 2008.

The closure of many factories in northern China early in November to reduce air pollution as Asia-Pacific leaders met in Beijing was no doubt partly to blame for the weaker-than-expected output.

But recent surveys have also shown slackening growth in export orders while a cooling housing market is weighing on domestic demand for products from concrete to steel. Fixed-asset investment, an important driver of growth, expanded at its slowest rate in nearly 13 years.

It grew 15.8 per cent in the first 11 months from the same year-ago period, in line with market expectations but slowing from a 15.9 per cent rise in the first 10 months.

Reuters