Cooling on the horizon for Chinese economy

This article is more than 12 months old

BEIJING: China's economy generally remained on solid footing last month, but tighter monetary policy, a cooling housing market and slowing investment reinforced views that it will gradually lose momentum in coming months.

Still, with half a year left, Beijing is expected to handily meet its annual 6.5 per cent economic growth target without too many bumps, good news for President Xi Jinping ahead of a major political leadership reshuffle later this year.

Slower fixed asset investment growth last month and a sharp deceleration in housing starts seen in data yesterday point to the cooling economists have been expecting.

But stable growth in factory output and retail sales, along with a pick up in exports, are cushioning the impact so far. A rise in inventories in the industrial sector and weaker producer price inflation will drag on growth, said Mr Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong.

"The first half of this year was a very happy period for China in the sense that we had that wonderful increase in output prices," said Mr Kuijs, referring in part to a construction boom which boosted demand and profits of structurally unhealthy sectors such as steel. - REUTERS