Consumer spending and factory output held steady in May in the world’s second largest economy, China, in line with market expectations, despite falling growth in private investment.
The government has been more cautious about stimulus spending because of growing fears about the risks of rising public debt in China.
However, in order to meet the government’s growth target of 6.5 per cent, many analysts believe that China has been spending on big infrastructure projects such as clearing shanty towns and improving urban drainage systems to give the economy a boost.
The pace of increase in industrial output slowed from 6.8 per cent in March and 6.1 per cent in the same month of last year, according to data from the National Bureau of Statistics (NBS).
China’s retail sales of consumer goods grew 10 per cent year on year in May, compared with the 10.1-per cent growth for April. In the first five months, retail sales were up 10.2 per cent year on year, according to the NBS.
However, fixed-asset investment increased 9.6 per cent in the first five months of 2016 - falling short of all 38 economists’ forecasts in a Bloomberg poll and the slowest pace since 2000.
Slower fixed-asset investment is mostly due to declining investment in legacy industries such as coal by privately owned enterprises.
Single monthly investment growth fell to 7.4 per cent from 10.1 per cent, weighed down by moderation in the housing market and further decline in manufacturing investment.
"The moderation in housing investment came a little earlier than we had expected, and will likely continue into the second half," said HSBC Greater China economist Julia Wang.
She believes that manufacturing investment could also weaken further due to continued capacity reductions and poor private sector sentiment.
“Encouragingly, infrastructure investment has held up well, supported by fiscal expansion. This has helped to stabilise growth in the first half of 2016,” she said.
“Policy makers have enough fiscal room to maintain or even accelerate the pace of fiscal expansion in the coming months. Apart from stabilising economic activity, more also needs to be done to stabilise business confidence,” Wang wrote.
Investment in real estate in May also posted its first year-on-year slowdown in growth since December as tightening measures in big cities took their toll, although property sales by area surged more than 32 per cent.
Property investment rose 6.6 per cent in May from a year earlier, according to Reuters calculations based on data from the NBS on Monday, compared with 9.7 per cent in April.
(Additional reporting agencies)
