China’s investment growth steady in August, industrial output and retail sales exceed expectations

Growth momentum in China is stabilizing. Rebalancing of China’s economy continues to take place. China’s fixed asset investment growth remained unchanged at 8.1 percent in the January to August period. This was a tad better than market projections.

Investment in China’s secondary industry rose just 3 percent in the January to August period, as compared with the growth of 3.5 in the January to July period. In the meantime, investment in the tertiary industry grew to 11.2 percent as compared with 10.8 percent in the January to July period. In the meantime, private sector investment rose 2.1 percent year-on-year in the January to August period, flat from the prior month. On the other hand, SOE investment continued to be an important source of growth, expanding 21.4 percent in January to August period.

Industrial production in the country grew 6.3 percent year-on-year in August, as compared with prior month’s 6 percent. It came in above the consensus projection of 6.1 percent. Rebound in headline industrial production might mask SME weakness, said ANZ in a research report.

In spite of certain factories halting production before the G20 meeting in Hangzhou in early September, growth in industrial production still managed to rebound. This is in line with the recovery of the official manufacturing PMI and exports. But the divergence of PMI performance between huge corporates and small-and medium sized enterprises continues to be a concern, added ANZ.

Retail sales in the country grew 10.6 percent year-on-year in August, as compared with previous month’s 10.2 percent. Retail sales also came in above market projections of 10.3 percent.

The data released today imply that the downside risk of China’s third quarter growth has reduced considerably. Recent data, including August exports and the PMI data imply that the momentum of growth has stabilized in the third quarter. If the momentum keeps up, the Chinese GDP might maintain a growth pace of 6.6 percent to 6.7 percent in the third quarter, as compared with the second quarter’s 6.7 percent growth, according to ANZ.