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China’s manufacturing growth at 3-year low

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China's factory production slows

3News NZ

Manufacturing growth in China has slowed to a 3-year low (Reuters file)

Manufacturing growth in China has slowed to a 3-year low (Reuters file)

By Louise Watt

Growth in China's factory production slowed to a three-year low in August, suggesting Beijing might need to launch more stimulus efforts to reverse a painful slowdown in the world's second-largest economy.

Inflation climbed to 2 percent as food prices rose, and further increases could complicate efforts by the government to revive growth as Europe struggles with a debt crisis and the U.S. economy remains sluggish.

Growth in industrial production weakened to 8.9 percent from July's 9.2 percent, according to National Bureau of Statistics figures released Sunday. August's growth was the most anaemic since May 2009, when factory production grew 8.9 percent.

"It's clear that the stimulus measures that have been put in place thus far have not yet had an impact on growth," said IHS Global Insight analyst Alistair Thornton. "So growth continues to slow, investment continues to weaken, the economy continues to go from worse to worse."

The government has cut interest rates twice since the start of June, but authorities are moving cautiously after Beijing's huge stimulus during the 2008 global crisis ignited inflation and a wasteful building boom. Growth slowed to a three-year low of 7.6 percent in the second quarter.

"The government doesn't want to repeat the mistakes of four years ago," but, given the pace of the slowdown, "they have to fall back on their tried and tested investment in infrastructure," said Thornton.

Highlighting the government's piecemeal approach to stimulating the economy, it announced Thursday it had approved 25 subway building projects worth tens of billions of dollars.

Other data Sunday showed that a jump in food prices pushed inflation to 2 percent in August from 1.8 percent in July. Food prices rose 3.4 percent from a year earlier in August after a 2.4 percent increase in July.

Retail sales growth for August inched up to 13.2 percent from the previous month's 13.1 percent.

Producer prices fell 3.5 percent year-on-year, compared with a 2.9 percent decline in July, which could help ease overall inflation pressures in coming months.

AP

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Comments

10/09/2012 3:56:06 p.m.

Mike wrote:

Amazing when 9% growth is seen as low. when was the last time the US/EU managed 9% growth? 50 years ago?

China investing in infrastructure is a smart move, as the infrastructure then allows more future growth.

Compare it to our Labour Party who would not spend a cent on infrastructure and pay everyone to stay home doing nothing. The reason China has made such huge growth in the last 30 years is its infrastructure spending. While the rest of the world spends less than 1% on infrastructure, China has spent as high as 16%. Yes China had a lot of catching up to do with the rest of the world, but they have caught up with plenty of the world, and they haven't slowed down much and are on their way to overtake everyone else who is sitting about doing not much - like the EU and US.

In China producer prices are going down still, much like our own farmers have over the years had falling incomes and made up the difference by becoming more efficient. The rest of the world could still learn much from following the same vs demanding higher prices for no reason as every union does here.