[SHANGHAI] China's economy resumed its grind toward slower growth in April, suggesting continued fiscal and monetary support is still needed to maintain demand.
Industrial production climbed 6 per cent in April from a year earlier, versus 6.8 per cent in March and economists' estimates for 6.5 per cent. Retail sales also missed analyst forecasts, rising 10.1 per cent, while fixed-asset investment increased 10.5 per cent in the January-April period versus economists' expectation for 11 per cent.
After a rocky start to 2016 marked by a sliding yuan, capital outflows and tumbling shares, China's economy had stabilised and even picked up since March, led by a rebound in the housing market. Saturday's readings and a pullback in new credit dash hopes the economy has turned a corner. Top leaders signaled a shift away from debt- and stimulus-fueled growth this week, stressing the need for deleveraging, upgrading industrial capabilities, and cutting excess capacity.
"On balance, the risks to growth and inflation remain on the downside, amid weak demand conditions and macro-prudential tightening," HSBC Holdings Plc economists led by Qu Hongbin wrote in a recent note. "We continue to see more policy easing and reforms as necessary to generate a sustained recovery."
Data on Friday showed China's broadest measure of new credit rose less than expected last month. Aggregate financing was 751 billion yuan (S$157.8 billion) in April, the People's Bank of China said. This was below all 26 analyst forecasts in a Bloomberg survey. New yuan loans were 555.6 billion yuan, compared with the median estimate for 800 billion yuan.
China's central bank sought to reassure investors that monetary policy will continue to support the economy after the sharp slowdown in new credit last month. The deceleration was mainly due to a pick-up in a programme to swap high-cost local government debt for cheaper municipal bonds, with no less than 350 billion yuan of such swaps conducted last month, while aggregating financing growth was affected partly by a decrease in corporate bond issuance, according to the central bank.
China's monetary policy remains prudent and policy moves must support economic growth while fully considering the impact on future prices and the need to prevent financial risks, People's Bank of China research bureau chief economist Ma Jun said in an e-mailed statement from the bank.