WSJ, March 12 2016 China Economic Data Paints Gloomy Picture Industrial production weaker than forecast for first two months of 2016, while retail sales miss usual Lunar New Year jump By MARK MAGNIER
BEIJING—Factories and retailers in China put in weaker-than-expected performances in the first two months of the year, as anemic demand and excess capacity continued to bear down on the world’s second-largest economy. Industrial production grew 5.4% in January and February compared with a year earlier, down from December’s 5.9% pace, according to government data released Saturday, and just below the 5.6% forecast by economists polled by The Wall Street Journal. Meanwhile, retail sales clocked 10.2% growth in the two-month period, slower than December’s 11.1% increase. While industries have been battered by the economic slowdown, retail sales have been relatively buoyant, so the downtick surprised some economists, especially since it occurred around the Lunar New Year holiday when consumption is usually strong. “Overall, the picture is still quite gloomy,” said Commerzbank AG economist Zhou Hao. “Normally, because of Chinese New Year, there’s a big drop and a big jump. This year there’s only a big drop.” The government combines some economic data for January and February to minimize distortions tied to the Lunar New Year holiday, which falls during those two months. It was in early February this year. One area that did pick up was investment in factories, buildings and other fixed assets, which increased a faster-than-expected at 10.2% year-over-year in January and February, compared with a 10% increase for all of 2015. Economists said that boost came largely from government spending on infrastructure and from investment in parts of the overbuilt property market. Mostly, economists said, weak demand at home and abroad is weighing on industries and many factories continue to churn out unneeded goods. Jiang Yuan, an economist with China’s National Bureau of Statistics, said makers of steel, cement and tobacco reduced output in response to slack demand. “A recovery is still eluding China’s industrial sector,” Mizuho Securities Asia Ltd. said in a recent report, before the release of the data Saturday. Chen Zhenxing, sales manager with Zhejiang Lanxi Shanye Machinery Co., which produces hand carts and other logistics equipment in the eastern city of Jinhua, said his company faces ongoing problems raising capital and boosting prices. “Competition is cutthroat,” he said. “Too many companies make products that are pretty much the same, so the focus turns to lowering prices.” At the opening of the annual legislative session this month, which lasts through mid-March, Premier Li Keqiang pledged to reduce taxes, cut red tape and streamline regulations to improve conditions for businesses. But Mr. Chen said he hasn’t seen much evidence of change on the ground. “It’s useless, just slogans,” he said. The weak production data suggest that first-quarter growth could fall toward the bottom of the government’s 6.5% to 7% target growth range for 2016, economists said. Concern over wobbly growth likely spurred Beijing to sharply boost credit in January and step up infrastructure projects, they said. “It’s only stabilizing the growth slowdown,” said HSBC Ltd. economist Ma Xiaoping. “It’s not a turnaround yet.” ‘Competition is cutthroat. Too many companies make products that are pretty much the same, so the focus turns to lowering prices.’ —Chen Zhenxing, sales manager with Zhejiang Lanxi Shanye Machinery Co. While property is picking up, activity is largely concentrated in China’s largest cities. Most other cities remain beset by overcapacity and show little evidence of improvement, economists said. Housing sales rose 49.2% year-over-year during the January-to-February period, compared with a 16.6% increase for all of 2016, the statistics agency said. Property investment growth is up 3% so far this year, compared with a 1% increase for all of 2015. Zhang Yiping, an economist with China Merchants Securities Co., said property investment and domestic consumption could be China’s major growth drivers this year given sluggish global demand and Beijing’s plans to cut industrial overcapacity. Commerzbank’s Mr. Zhou and other economists expressed concern that investment is flowing into a few real-estate markets that show signs of overheating, rather than into new ventures. “Monetary policy is relaxed, but it’s reluctant to go to the real economy, only to property assets,” he said. The slower pace of retail sales in January and February may reflect the turbulent financial markets and weak corporate profits last year, which dampened wage hikes and bonuses, economists said. Even accounting for data volatility around the Lunar New Year holiday, China’s economy is off to a slow start this year following economic growth in 2015 of 6.9%, the slowest pace in 25 years. A host of stimulus measures late last year and into 2016—most recently a 0.5 percentage point cut in bank reserves late last month—have yet to reverse the slide in momentum. —Grace Zhu and Esther Fung contributed to this article. _______________________________________________ pen-l mailing list pen-l@lists.csuchico.edu https://lists.csuchico.edu/mailman/listinfo/pen-l
