Economic Activity in China Shows Signs of Improvement
August data suggests a stabilizing downturn in growth, but challenges in real estate persist.
Industrial Production and Retail Sales
- Industrial production rose 4.5% in August, up from 3.7% in July.
- Retail sales expanded by 4.6% in August, compared to 2.5% in July.
Real Estate Challenges
Sino-Ocean, a major state-backed property developer, suspends repayments on offshore borrowings.
Investment in fixed assets grew by 3.2% in the first eight months of the year, slightly weaker than the previous seven months.
Property investment fell 8.8% in the first eight months of the year, with property sales by floor area dropping 7.1%.
Moody’s downgraded its outlook for the real estate sector due to a downturn in residential sales.
Optimism Amidst Challenges
Despite widespread pessimism, the worst may be over for China’s economy.
Weakness in the property sector and low confidence among business owners and consumers remain concerns.
Asian stock markets rallied following the release of the data.
Government Measures to Reignite Growth
The People’s Bank of China (PBOC) cut the reserve requirement ratio (RRR) for banks to support economic recovery and improve liquidity.
The RRR will be cut by 25 basis points for all banks, except those that have already implemented a 5% reserve ratio.
Mixed Economic Data
Consumer price index was up 0.1% in August, below market expectations.
Producer price index fell by 3% year on year, down for the 11th consecutive month.
China’s consumer prices contrast with inflation in other major economies.