China's economy, after chugging along in recent months, is likely losing some steam, with some economists expecting indicators for April to show weaker industrial production, softer overall credit and cooler export growth.
With a 6.9% pace of economic growth in the first quarter, policymakers have felt confident enough in meeting the 6.5% annual growth target to turn their attention to ferreting out financial risk. That push, in the form of higher short-term rates and tougher regulation, is already being felt in the wider economy: gauges of activity in the manufacturing and services sectors dropped in April.
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With the government more focused on asset bubbles than supporting growth, forces that recently buoyed the economy--a real-estate boom, higher commodity prices and stronger demand--are waning, said Larry Hu, an economist with Macquarie.
That weakness is expected to show up in a range of economic data the government is releasing this month. A median forecast of 11 economists surveyed by The Wall Street Journal expects value-added industrial output to have risen 7% in April from a year earlier, compared with a 7.6% increase the month before. Many cited moderating growth in coal consumption by major power plants as a factor.
Investment in factories, buildings and other fixed assets in non-rural areas likely rose 9.1% in the first four months of the year, according to the survey, after increasing 9.2% in the first quarter. Retail sales were expected to have risen 10.5% year-on-year in April, decelerating from 10.9% increase in March, the survey said.
The economists surveyed said the across-the-board slowdown is a return to normal for growth after what some called "March mania."
Trade too was affected, though both exports and imports likely maintained double-digit on-year growth in April, leading to a further widening of the trade surplus, according to the survey. Exports likely increased 10% in April, compared with 16.4% in March, due to improved global demand and a slightly weaker yuan. Imports likely rose 18% in April, down from 20.3% in March, mainly on softer import prices.
The trade surplus is expected to have widened to $33.7 billion, from $23.93 billion in March, according to economists. A larger trade surplus is likely to take some pressure of capital outflow off from Beijing.
With Beijing moving to tackle a too-hot real estate market and other frothy assets, mortgage loans, new corporate bond issuance, and new shadow credit all likely weakened in April, said UBS. That, some of the surveyed economists said, is going to weigh on the economy in the months ahead.
"Higher funding costs and slower overall credit growth may start to pose a heavier drag on investment and economic activity later this year," said economists at UBS.
New bank loans also likely slid to 766.5 billion yuan, from 1.02 trillion yuan in March. China's broadest measure of money supply, M2, was likely up 10.7% from a year earlier in April, according to the poll. That would be a tad higher than the 10.6% on-year growth in March, but still substantially lower than the annual target of 12%.
Write to Pei Li at firstname.lastname@example.org
(END) Dow Jones Newswires
May 05, 2017 07:13 ET (11:13 GMT)