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      Economy

      Slower May investments put economic pressure

      1
      2016-06-14 08:46Global Times Editor: Li Yan

      Services, consumption to hasten structural transformation: experts

      China's economy continues to face downward pressure as the growth in private investments in May continued to slow down.

      But experts believe measures to encourage greater domestic consumer spending would spur the country's economy.

      Private investments expanded 3.9 percent during the first five months, down 1.3 percentage points from January to April, according to data released by the National Bureau of Statistics (NBS) on Monday.

      Fixed-assets investments grew by 9.6 percent, 0.9 percentage points lower than in the first four month, the NBS said.

      NBS spokesman Sheng Laiyun said industrial producer prices continue to slide, and companies saddled with an overcapacity are experiencing diminishing profits, which dampens investment enthusiasm.

      The NBS said May industrial producer prices declined by 2.8 percent on an annual basis.

      Sheng added that some domestic industries have thresholds for private capital, which to some extent restrict their access, noting that "private firms also find it hard and expensive to get loans."

      The slower growth in domestic private investments reflects the downward pressure the Chinese economy faces, but not a further economic slowdown, Liu Xuezhi, a senior analyst at Bank of Communications, told the Global Times on Monday.

      "Economic reform is expected to provide greater incentives for private capital, such as lower taxes, easier access to loans, a cut in financing costs and more private capital in Public-Private Partnerships," Liu said.

      There are also fears that the Federal Reserve's hike in interest rates for the first time this year could affect the domestic market, he said, but that China is expected to boost the services sector and advance consumer spending in a bid to hasten the economy's structural transformation.

      Stable momentum

      China's fixed-assets investments and private investments dropped in May, but the nation's economic development remains stable and has even progressed during the period amid economic structural adjustments and the complex global situation, Sheng said.

      China's industrial output rose 6 percent year-on-year in May, unchanged from April, NBS data showed.

      Value-added industrial output, one of the leading indicators of economic growth, rose 0.45 percent in May from April, and the output of the high-tech and equipment manufacturing industries maintained robust growth, rising 11.5 percent and 8.5 percent.

      Retail sales also reported a 10 percent growth compared to 10.1 percent in April. Online sales in the first five months expanded 27.7 percent from the same period last year, the bureau said.

      Retail sales have contributed and will contribute significantly to China's economic growth since the country has shifted from an export-driven to a consumer-driven economy, experts said, noting that China's economic growth will remain stable the rest of the year.

      Given the economic performance in the first five months, the country's GDP growth is expected to hit 6.7 percent in the second quarter, Yao Shaohua, senior economist at Hang Seng Bank, said in a statement sent to the Global Times on Monday.

      The government is expected to continue expanding domestic demand and promoting supply-side reform to sustain the economic performance within a reasonable range, according to Sheng.

      However, the effects of overcapacity reduction and high debt will continue to plague the economy, experts noted.

      "Although cutting capacity would have a short-term impact on the economy, overall structural reform will be beneficial. And reducing overcapacity in sectors likes steel, coal and cement should gradually be carried out," Liu said.

      The central government is expected to deal with the challenges by implementing measures to sustain domestic demand like proactive fiscal policies to attract investments in infrastructure, including transportation and water conservation facilities, and offer greater assistance to low-income families and increased medical subsidies and education spending, Yao noted.

        

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