GROWTH in China’s fixed-asset investment slipped below 10 percent for the first time since 2000 in January-May as a boost from record credit growth seems to be already fading, putting expectations of further stimulus back on the table.

    The government has taken a more cautious stance on stimulus since commentary in official media last month warned of the risks of growing debt, but analysts said signs of weakness in the latest monthly data may spur policymakers into taking additional steps to support the economy.

    “I see rising odds of a cut in RRR (banks’ reserve requirements) or even a policy rate cut, before the end of the second quarter,” Zhou Hao, senior Asia emerging market economist at Commerzbank, said in a note after May activity data were released yesterday.

    With the economy not yet on solid footing, other analysts agreed that more stimulus is likely in coming months.

    “The government will likely launch more fiscal policies such as faster approval of infrastructure projects as downside risk to growth heightens,” said Raymond Yeung of ANZ in a note.

    A major worry for the authorities is the continued decline in fixed-asset investment by private companies.

    Overall fixed-asset investment growth fell to 9.6 percent in January-May from a year earlier, missing market expectations of 10.5 percent, which would have been unchanged from January-April.

    Investment by private firms slowed to a record low, with growth cooling to 3.9 percent from 5.2 percent in January-April and double-digits last year. Private investment so far this year has been the slowest since China began publishing the data in 2012.

    China needs to open up its State sector further in order to arrest the steep slowdown in private investment, statistics department spokesman Sheng Laiyun told a news conference, adding that falling prices and industrial overcapacity have impacted private investment.

    China’s foreign direct investment (FDI) fell 1 percent in May from a year earlier to 56.77 billion yuan, or US$8.89 billion, the Commerce Ministry said Sunday.

    This is the first year-on-year decline since December, when FDI dropped 5.8 percent from the year ago month.

    Other data yesterday were more mixed, suggesting the economy may be bottoming out and less at risk of a hard landing but is still struggling to regain traction.

    Factory output grew 6 percent in May from a year earlier, the same as in April and marginally better than expected.

    Analysts believe industrial output has been supported by a government infrastructure spending spree and a further recovery in the property market.

    Despite a jump in car sales, consumption softened slightly. Retail sales growth, which captures both private and government purchasing, slowed to 10.0 percent year on year. Analysts had forecast it would be unchanged from April at 10.1 percent.

    Trade data last week showed a further drop in exports but the smallest decline in imports in more than a year, suggesting domestic demand was picking up.

    Consumer inflation cooled, but production price deflation eased markedly, reducing some of the strains on Chinese firms which are battling shrinking profit margins.

    Government pledges to cut excess industrial capacity and restructure bloated State-owned enterprises are a major wild card, posing risks to near-term growth and the financial system. But most economists expect the Central Government to move slowly, fearing social instability if millions are suddenly thrown out of work.(SD-Agencies)