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Wednesday, August 12, 2015, 14:20

China's industrial output up 6% in July

By Agencies
China's industrial output up 6% in July

BEIJING - Newly released economic indicators fell short of market expectations, revealing that the Chinese economy still lacks momentum and downward pressure remains.

China's factory output rose 6.0 percent in July from a year earlier, down from 6.8 percent for June, the National Bureau of Statistics (NBS) said Wednesday.

The decline in output growth ended a trend of steady recovery reported in the second quarter of this year.

Jiang Yuan, statistician from the National Bureau of Statistics, attributed the drop mainly to flagging external demand, a weak property sector and less production of some consumer goods, including automobiles and cigarettes.

Year-on-year growth in the first seven months stood at 6.3 percent, the same level as the growth for the first half of the year.

The figures showed that industrial output in China's western regions increased by 7.9 percent in July, trailed by 7.4 percent in central areas and 6 percent in eastern regions.

In a breakdown, manufacturing output rose 6.6 percent, mining output added 5.6 percent, while output of electricity, heating, gas and water sectors dropped 0.2 percent, the bureau said.

RETAIL SALES GROWS

Retail sales grew 10.5 percent year on year to 2.43 trillion yuan ($383.8 billion) in July, slightly down from 10.6 percent growth recorded in June.

In the first seven months, retail sales grew 10.4 percent, the bureau said.

Growth in rural areas continued to outpace that in cities.

Sales in rural areas rose 11.9 percent in July and 11.6 percent in January-July period, in contrast to the 10.3 percent and 10.2 percent growth seen in urban areas.

Earnings for catering services in July grew 12.2 percent, 0.6 percentage points higher than June, according to NBS statistician Lin Tao.

Chinese consumers favor online shopping. In the first seven months, online sales rose 37 percent year on year, Lin said.

China's fixed-asset investment, a major driver of growth, also witnessed slightly slower growth, with no sign of improvement for investment in property and infrastructure.

DOWNWARD PRESSURE REMAINS

Qu Hongbin, chief China economist at HSBC, said the data fell below general market expectations.

The declining output and investment growth showed the rebound in June was just temporary and pressure for growth was again on the rise, Qu said.

"With gloomy prospects for external demand, China will still need to rely on domestic demand to maintain steady growth, indicating that future monetary and fiscal policies should continue to be relaxed," he said.

China's exports dropped 0.9 percent from a year earlier in the first seven months, according to new customs data.

A research note from Minsheng Securities also said China's growth is still facing huge pressure and the country needs to make more efforts to realize its goal of annual economic growth of around 7 percent.

China should take more pragmatic measures to stabilize growth, including further cuts in the reserve requirement ratio (RRR) and more targeted measures to reduce long-term interest rates, Minsheng said.

Qu added that the disappointing figures will also reinforce the market's expectations for further depreciation of China's currency, the yuan, posing risks of overcorrection in the exchange rate, which may lead to retaliation from other countries.

On Tuesday, China's central bank changed the exchange rate formation system to take into consideration the closing rate of the inter-bank foreign exchange market on the previous day, as well as supply and demand in the market and price movements of major currencies.

The central parity rate of the yuan weakened by about 1.6 percent against the US dollar Wednesday, following a 2-percent depreciation on Tuesday.

HSBC forecast an additional 25-basis-point interest rate cut and a 200-basis-point cut to the RRR in the second half to sustain growth.

The central bank has cut both interest rates and the RRR three times since the beginning of this year.

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