Chinese industrial output, investment and retail sales all slowed sharply at the start of the year, reinforcing concerns about a sudden weakening of growth in the world’s second-largest economy.
With global commodity prices already under pressure and bond troubles in China adding to market jitters, investors had looked to the data on Thursday as the first comprehensive indication of Chinese economic performance thus far in 2014.
The figures, which covered both January and February, fell short of market expectations on every metric.
Industrial output slowed to 8.6 per cent, down from 9.7 per cent in December and missing forecasts of 9.5 per cent. It was the lowest reading for industrial output, which closely tracks overall economic growth, since August 2009.
Fixed-asset investment fell to 17.9 per cent year on year, down from 19.6 per cent in December and far short of forecasts for 19.4 per cent.
Retail sales fell to 11.8 per cent from 13.1 per cent in December, again well below forecasts of 13.5 per cent.
The slowdown in China is in large part the product of the government’s own efforts to contain financial risks after a surge in debt levels over the past five years. Beijing has insisted that its policies are putting growth on a more stable footing, but many analysts and investors are worried that the deleveraging process could inflict substantial pain on the economy.
When Chaori, a struggling solar cell maker, became the first company to default in the domestic bond market last Friday, some saw it as augering further trouble in the country’s debt markets. A plunge in exports in February and a marked slowdown in non-bank financing at the same time contributed to the worries about the Chinese economy.
Chinese copper futures and international iron ore prices have slid to their lowest levels since 2009 in recent days, partly as slowing growth has forced Chinese importers to unwind financing deals backed by these metals.
Despite the mounting headwinds, the Chinese government has kept its headline economic target for 2014 unchanged from last year, aiming once again for growth of “about 7.5 per cent”. China narrowly beat its target last year, growing 7.7 per cent.
With the slow start to 2014, China is at risk of falling short of its aim this year. Li Keqiang, China’s premier, noted at a news conference on Thursday that the growth target was not ironclad. “A bit higher or a bit lower, we have a level of tolerance here,” he said.
Yet over the past month, some analysts believe that Beijing has already taken steps to prop up flagging growth. First, it has guided the renminbi down against the dollar, providing a little comfort to exporters. Second, and more important, the central bank has allowed liquidity conditions to loosen dramatically, a relaxation that could help companies thirsting for cash.