China factory output, investment slow

Pollution crackdown is weighing on industrial output as authorities also push ahead with a drive to reduce borrowing

By BLOOMBERG

BEIJING • China’s factory output and investment growth edged down amid a nationwide pollution cleanup campaign and a drive to rein in borrowing, while retail sales growth held up.

Industrial output climbed 6.1% from a year earlier in November, in line with the projection in Bloomberg’s survey and edging down from 6.2% the prior month. Retail sales rose 10.2% from a year earlier, less than the estimated 10.3% and compared to 10% in October. Fixed-asset investment excluding rural households increased 7.2% in the first 11 months of the year over the same period in 2016, in line with estimates.

An intensifying pollution crackdown is weighing on industrial output as authorities also push ahead with a drive to reduce borrowing, adding greater pressure on investment growth. Consumers remain a key growth prop, with e-commerce giant Alibaba Group Holding Ltd pulling in a record US$25 billion (RM102 billion) in sales during the Singles’ Day shopping bonanza last month. Any dollar strengthening on the back of tighter US monetary could prompt the People’s Bank of China (PBoC) to more aggressively raise rates after its surprise increase yesterday.

“Overall economic growth held up well in November, benefitting from stronger exports and resilient real estate activity,” Louis Kuijs, chief Asia economist at Oxford Economics in Hong Kong, wrote in a note. “Recent statements by policymakers confirmed a gradual shift in the macro policy stance towards somewhat less emphasis on growth and more on reducing financial risk and deleveraging parts of the financial system.”

“All the key activity indicators have been very stable,” Zhu Haibin, chief China economist at JPMorgan Chase & Co in Hong Kong, said in a Bloomberg Television interview.

Speaking just after the PBoC move, he added that if domestic growth accelerates and the dollar strengthens, China may need to raise its benchmark rate. “If the pace of US Federal Reserve rate hikes affects the dollar and Chinese capital outflows, that will change the mindset of the PBoC,” he said.

“The expected rebound after the Party Congress didn’t materialise and external demand seems quite stable,” said Ding Shuang, chief China economist at Standard Chartered plc in Hong Kong. “There could be further downside for the first quarter next year.”

“The economy is stable and resilient, and China is taking advantage of such a sweet spot to cut pollution,” National Bureau of Stat ist ics spokesman Mao Shengyong told reporters after a briefing in Beijing, adding that the economic impacts of pollution rules and a coal-to-gas shift aren’t yet clear.

“Data point to continued robust growth momentum into year-end,” Fielding Chen, a Bloomberg economist in Hong Kong, wrote in a note.

“The combination of strong credit expansion and continued solid growth adds some urgency for the PBoC to lean against leverage in the economy — as indicated by yesterday’s surprise move to nudge market rates a touch higher.”

Proper ty development investment rose 7.5% on year in the first 11 months.

New home sales by value rebounded in November, climbing the most in five months. Furniture sales climbed 11.9% last month.

The surveyed unemployment rate was about 4.9% with 12.8 million new jobs created in the first 11 months.

Natural gas production last month jumped to the highest since March as the producers scrambled to meet surging demand amid a government push to replace coal with gas.