Growth in Chinese investment and factory output slowed further last month as the government brought credit growth back to normal after a record lending spree in 2009 to counter the global financial crisis.
The figures, along with weaker retail sales, add to the picture of softening domestic demand painted on yesterday by a sharp drop in import growth.
Annual factory output growth slowed to 13.4 per cent last month from 13.7 per cent in June but beat forecasts of a 13.2 per cent rise.
Year-to-date growth in investment in fixed assets such as flats and factories in urban areas slowed to 24.9 per cent from 25.5 per cent, undershooting forecasts of a 25.2 per cent rise.
However, after taking into account wholesale inflation, which dropped to 4.8 per cent in the year to July from 6.4 per cent in June, real growth on the month was steady, according to Ting Lu, an economist at Bank of America Merrill Lynch. "China's growth is slowing, but we see no sign of a hard landing," he said.
Sheng Laiyun, a spokesman for the National Bureau of Statistics, which released the data, also struck a note of calm. He described the slowdown as moderate and a welcome step to a more sustainable model of growth that relies less on energy-intensive heavy industry. China this week ordered the closure of more than 2,000 obsolete, fuel-guzzling factories, steel mills and cement works.
Although figures yesterday showed stronger-than-expected exports, the Federal Reserve warned overnight that the pace of the US recovery had slowed. China is also concerned about the fragility of demand from Europe, which is drowning in debt.
If growth does continue to soften, some economists believe the government could speed up targeted investments in areas such as low-income housing, rural development and clean energy.
Another option would be to relax this year's loan quota of 7.5 trillion yuan, down from a record 9.6 trillion last year.
Tao Wang, UBS's China economist, said there was no reason for a knee-jerk easing. "The slowdown is still moderate. If people were looking for policy relaxation, they would be disappointed from this set of numbers," she said.
New loans in July alone totalled 533 billion yuan, the central bank said, below forecasts of a 600 billion increase.
Reuters