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China’s retail sales and industrial production grew faster than expected in August, data showed on Friday, in a rare boost after policymakers stepped up stimulus measures to support the world’s second-largest economy and stem a loss of momentum.
Industrial production rose 4.5 percent year on year in August, while retail sales, a gauge of spending that has remained persistently weak, rose 4.6 percent. Both metrics exceeded analyst expectations, as did July growth rates of 3.7 and 2.5 percent, respectively.
China’s economy has struggled to recover after three years of strict anti-pandemic measures were lifted early this year, as a slowdown in the real estate sector, collapsing trade and low consumer demand undermined confidence.
Other aspects of Friday’s figures highlighted the challenge for Beijing to reach its annual growth target of 5 percent, the lowest figure in decades.
Fixed asset investment fell to a 3.2 percent increase in the first eight months of the year, compared with a 3.4 percent increase at the end of July, while new home prices in 70 major cities rose month-on-month fell by 0.3 percent. Real estate investments fell by 8.8 percent in the January-August period.
China’s benchmark CSI 300 index of shares listed in Shanghai and Shenzhen pared losses on Friday, rising 0.1 percent after the data release.
Policymakers have unveiled a series of stimulus measures in recent weeks to boost growth and support the property market and currency. The People’s Bank of China cut reserve requirements for banks by 0.25 percentage points to 7.4 percent on Thursday, effectively injecting more liquidity into the financial system.
Zhiwei Zhang, chief economist at Pinpoint Asset Management, said the ratio cut sent a signal “that there is a sense of urgency to boost growth,” adding that he expected further policy changes in the coming months.
The central bank said on Friday it was keeping the interest rate on its one-year medium-term lending facility unchanged at 2.5 percent. Last month, the PBoC made an unexpected 0.15 percentage point cut in interest rates, which affect loans to financial institutions, as part of broader easing measures.
Major cities have also begun lifting price restrictions on home purchases in recent weeks, including lowering minimum mortgage rates and down payments, in a sign of mounting pressure to cope with a two-year cash crunch real estate, which has weighed on construction activity and local government finances.
The recent troubles at Country Garden, formerly China’s largest private developer by revenue, which nearly declared bankruptcy this summer, have raised concerns about spillover effects from the property market to the broader economy and financial system.
On Friday, Sino-Ocean, another Chinese developer, suspended repayments on all its offshore loans “in response to mounting liquidity pressures,” including “a rapid decline in contractual sales.”
The positive figures for industrial production and retail sales contributed to signs of cautious improvement in recent data.
Consumer prices in China turned negative in July before turning positive again in August, while exports and imports fell less sharply than in July last month, by 8.8 and 7.3 percent respectively.
The government also announced last month that it would stop publishing data on youth unemployment after it reached record levels.
Additional reporting by Hudson Lockett in Hong Kong