BEIJING - China's August economic data released Saturday gave relief to market participants, with the figures demonstrating the economy's continued momentum despite the government's tightening measures and moves to cool the property market.
Higher-than-expected growth in fixed asset investment, industrial production, retail sales and new loans, as well as the August trade data announced Friday, all pointed to the increasing strength of the Chinese economy.
Signs of re-acceleration
China's industrial value-added output growth accelerated to 13.9 percent year on year in August from July's 13.4 percent growth, the National Bureau of Statistics (NBS) data showed.
The rebound was the first increase in the speed of growth in industrial value-added output this year, after seven consecutive months of decreases in the rate of growth as the government introduced curbs on bank lending to energy-intensive industries and the property market.
"It is a good result," the NBS spokesman Sheng Laiyun said, adding the August output data was a mild rebound from the 13.4 percent growth in July and 13.7 percent growth in June, suggesting China's industrial production stabilized from fast expansion in the first half.
Retail sales growth accelerated to 18.4 percent in August. Urban fixed asset investment also maintained a strong growth in the first eight months, up 24.8 percent from a year earlier.
Further, an unexpected acceleration in China's imports last month pointed to strong domestic demand. Exports grew 34.4 percent year on year in August, slowing from July's 38.1-percent surge, while imports rose 35.2 percent in August, sharply up from the 22.7-percent increase in July, customs data showed Friday.
Zhang Liqun, a researcher with the State Council's Development Research Center, said the investment, consumption and exports data were good and suggested that China's economic growth rates will not decline significantly.
New yuan-denominated lending picked up to 545.2 billion yuan (US$80.53 billion) in August compared with the 532.8 billion yuan in July, the People's Bank of China, or the central bank, said in a separate statement Saturday.
China's broad money supply (M2), which covers cash in circulation and all deposits, increased 19.2 percent year on year by the end of August, up 1.6 percentage points from the end of July.
The rebound of M2 from July indicated that China's economic slowdown was not as rapid as expected, said Liu Yuhui, economist with the Chinese Academy of Social Sciences.
"The overall economy is stable and sound. It is heading in the direction expected and as set by the government's macro-economic controls," Sheng said.
Earlier figures showed that China's GDP grew 11.1 percent year on year in the first half of the year. But its economic growth rate slowed to 10.3 percent in the second quarter, from 11.9 percent in the first three months the year.
Inflation not a concern
Although China's inflation rate quickened to a 22-month high, economists said it is not cause for worry as the bulk of the price increases came from higher food costs that were caused by adverse weather conditions, which will not last.
The consumer price index (CPI), a major gauge of inflation, rose 3.5 percent from a year earlier in August, the second consecutive month the CPI has exceeded the government's full-year target of 3 percent.
Food prices, which have about a one-third weighting in the calculation of the CPI, climbed 7.5 percent year on year in August, according to NBS statistics. The pace of growth quickened from the 6.8-percent rise in July and 5.7-percent growth in June.
The CPI grew 0.6 percent in August from July. For the first eight months, it increased 2.8 percent year on year.
Analysts expect the CPI to ease in the fourth quarter.
Zhu Jianfang, chief analyst at Citic Securities, said the pace of food price increases is likely to ease from September and that the chances of an interest rate hike are slim.
"With proper regulation for the rest of the year, it is still feasible to realize the government's full-year inflation control target," Sheng said.
Renowned economist Fan Gang said on Friday on a forum in Shaoxing, Zhejiang Province that food prices are expected to remain stable this year and no serious inflation is anticipated in the second half.
The manufacturing industry has overcapacity, which does not support serious inflation, said Fan, director of the National Economic Research Institute.
He said food prices in China will remain stable in the second half of this year because international food prices haven't seen large fluctuations, despite Russia's ban on grain exports until the end of the year.
Meanwhile, China's annual grain production has recorded increases for six consecutive years, he said.
The impact on grain harvests from natural disasters that hit some regions this year would remain manageable, he said.
The August economic indicators reflected a moderation in China's growth slowdown but the possibility for further growth deceleration cannot be ruled out, said Lu Zhengwei, chief analyst at the Industrial Bank.
One major concern is whether China could find a way to balance efforts to complete the 4-trillion-yuan economic stimulus package with the meeting of targets to cut energy use and emissions, Lu said.
To stave off adverse effects of the global financial crisis, China announced in late 2008 a stimulus package of 4 trillion yuan to be implemented by the end of 2010.
The package led to a lending and investment boom in China last year. But no information is available on the latest developments of the stimulus package.
This year is the last year in China's 11th Five-year Plan (2006-2010), under which the country planned to cut its energy consumption per unit of GDP 20 percent by year end.
The past four years saw the figure decline 14.8 percent. However, the energy consumption per GDP unit rose slightly, 0.09 percent, in the first half of 2010, suggesting it would be difficult to reach the target level by the end of the year.
As the deadline approaches, many provinces, including Zhejiang, Jiangsu, Hebei and Shanxi, have set limits on electricity consumption for high energy-consuming and high-polluting industries. Analysts believe this may affect growth in industrial production.
China's policies to cool the real estate market and the uncertain outlook for exports in the second half will contribute to a slowdown in economic growth, Xin Guobin, an official with the Ministry of Industry and Information Technology, said earlier this month.
"Speculation about a stronger yuan and the spread of the sovereign debt crisis in the European Union lead to uncertainties for the country's second-half exports," he said.
Economists forecast China's economic growth to slow to around 9 percent in the third quarter the year and then 8 percent in the fourth quarter.