SIGNS of strength in China’s industrial sector should give the government room to push much-needed reforms through the end of the year, though trade and investment are expected to remain weak, according to Reuters polls ahead of a flurry of August data.
Growth momentum from a housing recovery and government infrastructure spending, and evidence that companies are hoarding cash instead of investing, means China’s policymakers are unlikely to cut interest rates or bank reserve requirements any time soon, sources have told Reuters.
The economy grew faster than expected in the second quarter, and strong July industrial profits and an official August factory survey last week showed momentum is continuing into the third quarter.
But analysts say the economy has become too reliant on higher government spending and a property rebound that may be running out of steam, even as debt piles up.
Without a pick-up in demand and private sector investment, economists predict policymakers will have to choose between sticking to reforms or launching another round of stimulus as early as the first quarter of next year.
With global demand subdued, Asia’s trade recession shows no sign of abating soon and economists polled by Reuters expected China’s August exports fell 4 percent, a similar rate to July.
Imports may have fallen 4.9 percent, which would be a significant improvement from July’s 12.5 percent fall, likely due to higher commodity prices.
China’s trade surplus is forecast to have expanded to US$58 billion in August.
Consumer inflation is expected to remain weak, falling slightly from July to 1.7 percent.
Foreign exchange reserves for August likely dipped to US$3.19 trillion after falling slightly in July.
The country’s forex reserves data are expected to be released Wednesday, with trade and inflation coming Thursday and Friday, respectively.
Industrial output, investment and retail sales will be released Sept. 13. Loan and money data will be released Sept. 10-15.
(SD-Agencies)
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