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POLITICAL ECONOMY
China industrial output growth jumps to five-month high
by Staff Writers
Beijing, China / China (AFP) Aug 09, 2013


China vehicle sales growth slows in July
Shanghai, China / China (AFP) Aug 09, 2013 - Growth in China's vehicle sales slowed to an annual 9.9 percent in July, an industry group said Friday, as the world's largest car market entered its low season.

Sales totalled 1.52 million last month, the China Association of Automobile Manufacturers (CAAM) said in a statement, a slowdown in growth from June's 11.2 percent improvement.

Sales for the first seven months totalled 12.30 million units, the group said, up 12.0 percent from a year earlier but lower than the 12.3 percent growth registered in the first half.

Automakers usually carry out equipment maintenance and send workers on holiday to avoid China's hottest weather in late July and early August, CAAM said in explanation of the slowdown.

Monthly passenger vehicles sales grew 10.5 percent year-on-year to 1.24 million units, the statement said, adding Chinese-brand sales increased 5.8 percent to 435,500 units to give them a 35.2 percent market share.

It was their lowest share of the market since the global financial crisis in 2008, the group said, adding their situation was "grim".

Among foreign brands, German carmakers had the largest share with 21.4 percent, followed by Japanese companies on 17.6 percent and US firms with 13.6 percent.

China became the world's largest auto market in 2009.

Consulting firm McKinsey forecasts the country's passenger car market to grow an average of eight percent annually through to 2020, when sales will reach 22 million.

Foreign automakers have announced plans to expand in China, where increasing wealth is giving consumers more money to spend.

US automaker General Motors announced in June it would invest $11 billion in China through 2016, as it broke ground on a plant to produce luxury Cadillacs.

And in May German auto giant Volkswagen broke ground on a new plant in the central city of Changsha, due for completion at the end of 2015, with an annual output capacity of about 300,000 vehicles.

Fall in China loans in July: central bank
Beijing (AFP) Aug 09, 2013 - Chinese banks granted fewer loans in July than the previous month, data released by the central bank showed Friday, in the aftermath of a liquidity crunch that rattled banks.

Banks extended 699.9 billion yuan ($114 billion) in new loans last month, the People's Bank of China (PBoC) said in a statement, down from 860.5 billion yuan in June.

But the July figure was still ahead of expectations, beating a forecast of 633 billion yuan by 14 economists polled by Dow Jones Newswires.

"We do see some negative impact of the June inter-bank liquidity crunch on credit availability for the real economy as evidenced by the sharp fall in corporate bond issuance and bills," Bank of America Merrill Lynch economists said in a report.

"But we believe the impact is muted as Premier Li Keqiang's team has taken decisive measures to calm the inter-bank market and to support growth."

Despite July's decline, economists described the month as overall showing "relatively stable credit growth".

A cash crunch spooked Chinese financial markets in late June before the PBoC, which had ordered banks to strengthen liquidity management, moved to calm nerves with an offer of support.

In late July, the PBoC injected 17 billion yuan into the domestic banking system, the first such move since February, a step analysts said indicated the central bank's intention to ease liquidity conditions in the banking system. So far this month it has added another 46 billion yuan.

The brief turmoil in June underscored rising concerns over excessive lending by banks and other weaknesses in China's financial system, including opaque non-bank forms of lending, often called "shadow finance".

Growth in China's key industrial production accelerated to a five-month high in July, the government said Friday, providing optimistic pointers for the world's second-largest economy after months of negative indicators.

Industrial production, which measures output at factories, workshops and mines, rose 9.7 percent year-on-year, well above analyst expectations of 9.0 percent in a survey by Dow Jones Newswires.

Authorities also announced steady expansion in retail sales and fixed asset investment, and a benign inflation figure of 2.7 percent, unchanged on last month.

Analysts said the figures pointed to a more stable outlook for China's economy -- seen as a key driver of global growth.

Lu Ting, a Hong Kong-based economist for Bank of America Merrill Lynch, told AFP the "overall figures are actually very good, especially the industrial output figure".

Gross domestic product (GDP) in China expanded 7.8 percent in 2012, its slowest annual pace in 13 years.

Growth slipped to 7.7 percent in the January-March period this year and slowed further to 7.5 percent in the second quarter, raising alarm bells over possible deeper weakness.

But after Friday's figures Lu said: "The momentum, if maintained, would in fact make everyone's estimation about the second half rather pessimistic, so we will likely see a round of GDP forecast upgrades soon."

Beijing has set a goal of a 7.5 percent increase in GDP this year and ANZ economists Liu Li-Gang and Zhou Hao said in a report the better-than-expected July data made it "more likely to be attainable".

Concerns over a hard landing had "largely diminished", they added. "This should facilitate and accelerate the structural reform agenda in China."

The government has largely faced down mounting pessimism over the economy and refused to undertake major stimulus efforts as it vows to restructure China's economy to make it less dependent on exports and investment, and driven more by the power of the country's consumers.

The output figures came on the heels of robust trade figures Thursday and an official manufacturing survey last week that showed expansion when many analysts had expected a contraction.

Exports and imports, which had contracted in June, rebounded in July, growing 5.1 percent and 10.9 percent year-on-year respectively, according to Customs.

Two-way trade rose 7.8 percent year-on-year, slightly lower than the government's eight percent target for this year but "showing a stabilising and recovering trend", Customs said.

July's output growth figure was higher than June's 8.9 percent and marked the best performance since the 9.9 percent recorded for January and February, which were released together due to distortions related to Chinese New Year.

Separately, retail sales, a key indicator for consumer spending, rose 13.2 percent in July compared with the same month last year, the government said, only a marginal slowing from 13.3 percent in June.

Growth in fixed asset investment, a key measure of government spending on infrastructure, increased 20.1 percent during the first seven months of this year compared with the same period in 2012, unchanged on last month's rate.

Earlier Friday, the government said that inflation held steady at 2.7 percent year-on-year in July, a result seen as potentially giving the authorities some leeway to take measures to boost the economy if needed.

The consumer price index (CPI) rise was marginally below market expectations of 2.8 percent, according to the Dow Jones survey. The CPI reading -- a main gauge of inflation -- has broadly eased since hitting 3.2 percent in February during the Chinese New Year holiday, although it rebounded in June to a four-month high.

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