China's April data reveals signs of weak economic performance

Disappointing Chinese manufacturing and property market data reveal new signs of economic weakness, which may put pressure on the government to boost the economy.

Economists have been hoping to see signs of a sharp slowdown in China's economic growth in the first quarter, as this may help the government achieve its goal of a 7.5% annual economic growth.

However, the April data released on Tuesday showed that the slowdown in the real estate market has had a knock-on effect on industrial output, retail sales and investment in machinery, land and other physical assets. The increase in all the above indicators has decreased compared with the same period of the previous year.

Liu Ligang, an economist at Australia & New Zealand Banking Group Ltd., said the data reveals a rather serious situation, suggesting that China's economic activity has not only not risen, but may still be at a low point. He said that if the government is serious about the 7.5% growth target, then this data is a wake-up call for policymakers, requiring policymakers to take more decisive action.

In recent weeks, at least two local governments have loosened the control measures introduced during the bubble period of the property market, including extending the priority of housing purchase rights to residents in the surrounding areas, and relaxing the requirements for foreign residents to purchase houses.

Expenditures in the real estate sector include indirect expenses such as the purchase of furniture and property management fees, which account for about a quarter of the Chinese economy. This proportion is so high that it has reached the point where the real estate market decline will produce a domino effect.

Wang Tao, an economist at UBS, said the risks in the real estate industry are the most worrying issue facing the Chinese economy this year.

According to data released by the National Bureau of Statistics of China, in the first four months of this year, national residential sales fell by 9.9% year-on-year to RMB 1.53 trillion (approximately US$245.6 billion), a decrease from 7.7% in January-March. . The National Bureau of Statistics disclosed comprehensive data for the first four months, and did not list monthly data.

As banks continue to tighten mortgages, demand for home purchases in more Chinese cities has cooled. Buyers expect developers to cut prices further, so keep a wait-and-see attitude.

In the first four months of 2014, national real estate investment increased by 16.4% year-on-year, and the investment amount reached RMB 2.23 trillion, but the growth rate was lower than 16.8% in January-March.

Societe Generale economist Yao Wei said that although rising debt levels are worrying, it is necessary for the People's Bank of China to loosen its lending policy for real estate developers and homebuyers, thereby boosting the weak real estate market. . She said that if the current tightening credit policy lasts longer, the government will have difficulty reversing the real estate market in the short term.

Analysts said that as the second quarter entered, sluggish industrial value added, investment and real estate data could force the People's Bank of China to cut the deposit reserve ratio of commercial banks. In general, the second quarter is a quarter of China's faster economic growth due to accelerated investment growth after the winter.

According to the National Bureau of Statistics of China, the industrial added value in April increased by 8.7% compared with the same period of the previous year, which was slightly slower than the growth rate of 8.8% in March.

In the first four months of this year, China's fixed assets investment (excluding rural households) increased by 17.3% compared with the same period of the previous year, which was slower than the 17.6% year-on-year growth in January-March.

Total social retail sales in April increased by 11.9% from the same period of the previous year, and the growth rate slowed down from 12.2% in March.

In order to boost demand shortages, Chinese leaders announced a series of “micro-stimulus” policies in February this year, including tax and fee reduction measures for SMEs and increased investment in transportation facilities. The outside world believes that these measures are more targeted than large-scale stimulus policies that may eventually lead to more bad debts. However, some analysts said that the latest economic data shows that these measures are not enough to offset the adverse effects of weakening China's economic fundamentals.

Wang Tao of UBS said that today's data shows that the Chinese government's micro-stimulus measures have not fully worked.