BEIJING Dec 13 China posted its strongest
retail sales growth of the year in November, while surging steel
production lifted factory output, but private investment began
to slow again, leaving the economy more reliant on state
spending and mounting debt.
After a rocky start to the year, China's economy has
performed better than expected and looks set to hit Beijing's
6.5 to 7 percent growth target as higher government spending and
a sizzling housing market fuel a construction boom.
The pickup in China's manufacturing sector has helped spur a
rebound in global prices of industrial commodities and other
goods, adding a welcome reflationary pulse that is slowly being
felt around the world.
But one of the Chinese economy's key growth drivers this
year -- housing -- is showing increasing signs of fatigue.
Growth in home sales slowed to the lowest rate in a year in
November as more cities tried to cool red-hot prices, while the
pace of new property investment also fell from recent highs. New
construction starts rose just 3.3 percent on-year after climbing
20 percent in October.
"(The housing market) will continue to cool, and fall to
negative growth next year," said Zhao Yang, chief China
economist at Nomura in Hong Kong.
"If the government doesn't ramp up infrastructure spending,
the expected decline in property will certainly drag on growth."
Property sales growth slid in November to 7.9 percent from a
year ago, its lowest since November 2015, and well short of
October's 26.4 percent increase.
While overall growth in fixed-asset investment held steady
at 8.3 percent in the first 11 months of the year, the gap
between state and private spending highlighted persistent
imbalances in the economy.
Investment by private firms slowed in November, reversing a
recent recovery from record lows. That is putting more pressure
on state firms to pick up the slack and raising fears that this
year's economic momentum will not be sustainable.
Growth of private investment fell to 4.93 percent on-year in
November from 5.9 percent in October, according to a Reuters
calculation, suggesting private firms continue to struggle even
as the broader economy gets back on steadier footing.
Indeed, state firms maintained strong spending, boosting
investment by 20.2 percent in Jan-Nov, though the pace slowed
slightly from Jan-Oct.
Government spending picked up 12.2 percent in November after
falling in October, China's Ministry of Finance said on Tuesday.
In order to meet growth targets, China may increase its
budget deficit ratio to 3.5 percent next year, from a 3 percent
target this year, a senior official at a government think tank
said on Tuesday, to accommodate a further rise in government
Top leaders are due to map out their economic and reform
agenda for 2017 during an annual Central Economic Work
Conference later this month.
Growing debt and property risks have touched off an internal
debate about whether China should tolerate slower growth in 2017
to allow more room for painful reforms aimed at reducing
industrial overcapacity and indebtedness.
FACTORIES STEADY, RETAIL STRONG
China's factory output grew slightly faster than expected in
November, with steel output rising the fastest in two years and
carmakers cranking up production.
Retail sales climbed 10.8 percent, the fastest pace since
December 2015 and beating expectations for a 10.1 percent rise,
buoyed by gains in auto sales, home appliances and cosmetics.
Auto sales in China surged for a sixth consecutive month in
November, an industry association said on Monday, as consumers
rushed to buy cars amid uncertainty over whether a tax incentive
will be extended beyond the end of the year.
Big luxury brands also reported an improvement in China
sales this year after a three-year downturn as Chinese shoppers
are spending on luxury goods at home again. Burberry,
Gucci-owner Kering, and Tiffany have all
reported an uptick in their China earnings,
Part of that is due to the falling value of the yuan, which
diminishes the appeal of spending abroad and encourages more
domestic spending, said Wang Jianhui, an economist with Capital
Securities in Beijing. The yuan has slid to more than 8-year
lows against the dollar so far this year.
Other November data showed China's imports grew at the
fastest pace in more than two years in November, led by
commodities from coal to iron ore and copper, while exports also
rose unexpectedly, reflecting a pick-up in both domestic and
However, China's trade outlook is being clouded by
increasing fears of protectionism as U.S. President-elect Donald
Trump prepares to take office.
Trump has threatened to label China a currency manipulator
on his first day in office in January, and has threatened to
impose huge tariffs on imports of Chinese goods.
(Reporting by Kevin Yao and Yawen Chen; Writing by Elias Glenn;
Editing by Kim Coghill)