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 Analysts expect the government to keep up policy support to help
achieve its 7.5 percent growth target this year. But at the same
time, authorities will tread cautiously in spurring growth in an
economy already burdened by piles of debt - a legacy of past
pump-priming.
A Reuters poll of 23 economists showed annual growth in factory
output, retail sales and fixed-asset investment likely softened a
tad in August from July, while bank lending may have recovered and
consumer inflation remained benign.
"The economy faces relatively big downward pressures in the third
quarter, especially as a protracted slowdown in investment makes it
harder to achieve the growth target," said Wen Bin, an analyst at
China Minsheng Banking Corp <600016.SS> in Beijing.
"Both fiscal and monetary policies need to be loosened further to
help fulfill the growth target," he said.
In the poll, fixed-asset investment - a key economic driver and an
important indicator of the effectiveness of stimulus measures - is
forecast to have grown 16.9 percent in the first eight months of
2014 from a year earlier. Through the first seven months, the
increase was 17 percent.
Retail sales, a key measure of domestic consumption, likely grew
12.1 percent in August from a year earlier, a tad below July's 12.2
percent, according to the poll.
Factory output likely grew by an annual 8.8 percent in August,
slowing from 9.0 percent in July and mirroring recent purchasing
managers' surveys that showed factory activity cooled last month as
demand slackened. [ID:nL3N0R20EX]
For detailed forecasts, please click: [ID:nL3N0R42MC]
STIMULUS MEASURES
China's annual economic growth picked up slightly to 7.5 percent in
the second quarter from an 18-month low of 7.4 percent in
January-March, helped by a series of policy stimulus measures.
These included accelerated construction of railway and public
housing projects, cuts in reserve requirements (RRR) for some banks
and loosening of property controls by some local governments to
support the cooling housing market.
But hopes that the mild rebound would gain traction were dashed in
August when growth in retail sales and fixed asset investment
slowed, while money injected into the economy unexpectedly tumbled
to a near six-year low.
Analysts attributed renewed economic weakness to increased headwinds
from a slowdown in the property sector, which appears to be
deepening despite a rush among local governments to relax
home-purchase restrictions to spark demand.
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Last week, Premier Li Keqiang pledged to keep the government's
"targeted" policy stance, focusing on investment projects that seek
to end bottlenecks, including in public hospitals and nursing homes,
and promote clean energy.
LOWER INFLATION RATE SEEN
Inflation may have headed lower in August, giving the central bank
more room to maneuver in setting policy, but most analysts believe
there will not be aggressive credit loosening any time soon.
"We expect the authorities to keep the easing policy bias, mainly by
lowering the cost of funding to achieve the growth target," analysts
at Citigroup said in a note on Tuesday.
"It may take a sharper downturn for the government to introduce
broad-based RRR or benchmark rate cuts," they wrote
The poll saw annual consumer inflation easing slightly to 2.2
percent in August from 2.3 percent in July, way below the
government's annual target of 3.5 percent.
Factory-gate prices are expected to continue a downward trend, with
the pace of annual decline forecast to deepen to 1.2 percent in
August from 0.9 percent the previous month.
Exports in August likely grew 8.0 percent from a year ago, compared
with a jump of 14.5 percent in July, while imports were seen growing
1.7 percent, after their 1.6 percent drop in July.
These projections would produce a monthly trade surplus of $40
billion, down from July's $47.3 billion.
The poll also showed banks likely extended 700 billion yuan
(US$113.86 billion) in new loans last month, quickening from July's
385.2 billion yuan, while annual growth of M2 money supply may have
held largely steady at 13.4 percent.
(1 US dollar = 6.1480 Chinese yuan)
(Editing by Richard Borsuk)
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