Figures released out of China on Saturday show that China’s industrial production and retail sales both slowed in the first two months of the year.
According to the National Bureau of Statistics, industrial output rose 5.4 per cent from a year earlier in January and February, compared with the 5.6 per cent median estimate of economists surveyed by Bloomberg. Retail sales climbed 10.2 percent from a year earlier, falling short of the 11 per cent gain estimated in the Bloomberg survey.
The data suggests Chinese leaders face a big challenge meeting the year’s growth target of 6.5 to 7 per cent.
“The overall growth profile remains still gloomy,” Zhou Hao, an economist at Commerzbank AG in Singapore told Bloomberg. “The mix of data give us a worrying picture. Activity data remained weak while inflation and property prices are turning around.”
People’s Bank of China Governor Zhou Xiaochuan said however that the government will not need any stimulus to meet its target of at least 6.5 per cent growth over the next five years.
“Excessive monetary policy stimulus isn’t necessary to achieve the target,” Zhou told reporters. “If there isn’t any big economic or financial turmoil, we’ll keep prudent monetary policy.”
At the same time, the value of property sales in the first two months of this year surged 43.6 per cent from a year earlier. Property sales in some mid-sized cities doubled. Prices in Shanghai are up nearly 20 per cent over the last year and in the technology hub of Shenzhen, which borders Hong Kong, they are up 70 per cent.
“Property and easy credit have worked as engines of growth before for the government and it looks like they are going back to what they know,” Michael Cole, the founder of Shanghai-based property consultancy Mingtiandi told the Australian Financial Review. “The big rolling ball of Chinese hot money is going back into property.”