China’s economy continues to lose steam after a mild rise in late 2012. In January and February annual industrial production growth slipped to 9.9% from 10.3% in December. (The data covers the first two months combined to reduce the volatility caused by Chinese New year celebrations.)
Retail sales growth fell from 15.2% to 12.3%. Holiday season sales growth hit a nine-year low. January and February’s export growth jumped to 23.6% year-on-year, although imports expanded by just 5%. Industrial commodity imports are still below levels a year ago. Annual inflation jumped to 3.3% in February from 2% in January.
What the commentators said
The latest data make “sobering reading”, said Tom Orlik in The Wall Street Journal. It seems China’s late-2012 “mini-stimulus is costing more in inflation, and delivering less in growth, than its architects hoped”. There is certainly no sign, added Credit Suisse, that the growth momentum generated by the renewed drive in fixed-asset investment has spread to other sectors. Unless it does, this remains a “narrow-based recovery”.
China has begun 2013 “with the same old economic model”, said John Foley on Breakingviews. Instead of increasing consumption, it has continued to rely on exports and credit-fuelled investment, notably in real estate. The government may be trying to temper speculation, but investment in residences jumped by 23% in the first two months – compared to 11% for the whole of 2012.
That’s because overall credit in the economy, known as “total social financing”, rose by 79% year-on-year in January and February. This spree is unsustainable as it is causing “an ever greater build-up of financial risk”, said Foley. The expansion of credit in recent months may have put off a property crash for now, but “an eventual reckoning still looks inevitable”.