Industrial growth gaining momentum

Photo by Wang Jing/China Daily

Government support policies and recovery in global demand boost industries

China has achieved its highest industrial growth since March without considerable expansion in fixed-asset investment.

A strong rebound in business helped national industrial output to rise by 9.7 percent year-on-year in July, up 0.8 percentage points from June, the government reported on Friday.

July's industrial output growth was close to the monthly record of 9.9 percent in January and February.

Economists attributed the industrial rebound to the government's determination to meet this year's GDP growth target of 7.5 percent and the recovery in global demand for Chinese products.

Of 41 industries, 39 reported accelerated year-on-year growth, with the major driving force coming from State-owned enterprises.

The automobile industry saw its output grow by 14.1 percent, which also helped output in the steel industry to rise by 10.9 percent, according to the National Bureau of Statistics.

Industrial output in western China rose by 11.5 percent, compared with 10.8 percent in central China and 8.8 percent in eastern China.

The results for industry are in line with the Manufacturing Purchasing Managers' Index in July, which rose from 50.1 to 50.3, meaning that business activity is probably gathering speed.

"My way of reading the data is that growth of the overall economy has become stable, although there are still no signs of a major rebound," said Wang Yuwen, a senior researcher at the Finance Research Center of the Bank of Communications.

Wang said the absolute value of industrial inventory has increased since June, and is higher than at the same period last year, indicating strengthened confidence among enterprises. It is also a positive sign for the global commodity market.

Markets reacted favorably to the news.

The FTSE 100 index, which tracks 100 companies listed on the London Stock Exchange with the highest market capitalization, was up by more than 55 points in mid-afternoon trading.

The CSI 300, which covers leading Shanghai and Shenzhen A-share listings, ended the day up by 0.4 percent.

Fixed-asset investment from January to July increased by 20.1 percent year-on-year, unchanged from the rate in the first six months.

Retail sales of consumer goods in July rose by 13.2 percent, compared with 13.3 percent in June, the statistics bureau said.

Alessandra Guariglia, head of the Department of Economics at the University of Birmingham in Britain, said Chinese enterprises will maintain productivity and be able to achieve high profit growth this year.

Even though China's GDP growth may slow to between 7 and 8 percent from double-digit growth some years ago, it is still very solid and a crucial engine for the global economy, Guariglia said.

The NBS also released the Consumer Price Index, a main gauge of inflation, on Friday, showing growth of 2.7 percent in July, the same as for June.

The Producer Price Index, which reflects factory activity, continued to drop in July but at a slower pace of 2.3 percent, compared with 2.7 percent in June.

Liu Ligang, chief economist in China with ANZ Group, said, "The year's inflation may have peaked in June and July, and the CPI for the next two months is likely to slip below 2.5 percent, while the drop in the PPI may be much slower."

Wang Tao, chief economist in China at UBS, said, "The renewed life in external demand could provide support for China's economic growth in the second half, helping the government to achieve its 7.5 percent growth target for this year."

After China's growth hit 7.5 percent in the second quarter, the lowest since the third quarter of 2012, guidelines were released to accelerate reforms. These include encouraging public consumption, maintaining rational investment growth, and strengthening policy support for small and medium-sized enterprises.

Zhu Haibin, chief China economist at JPMorgan, said: "Mini-reform measures have been introduced to support domestic demand, such as investment in railways and infrastructure as well as supportive measures for exports. "We expect more fine-tuning measures to come in the coming months."