WHEN Li Keqiang, China’s prime minister, spoke at a big business meeting earlier this month, he trumpeted two achievements. Not only had the government overseen steady economic growth, he said, but it had done so without resorting to a big stimulus. Both assertions are now looking rather doubtful.
A barrage of data for August pointed to a sudden weakening in growth, catching many analysts and investors by surprise. Although it is unwise to read too much into one month’s numbers, the figures had a distressingly uniform downward tilt. Investment, retail sales and credit issuance all slowed. Industrial output, which is closely correlated with GDP given the size of China’s manufacturing sector, grew at its weakest pace since late 2008, when the global financial crisis was battering the economy. Housing sales, already struggling, contracted further; they have fallen 8% so far this year. That has started to eat into the revenues of local governments, since property developers are holding back on land purchases. Yao Wei of Société Générale, a French bank, called it a “shockingly sharp” deceleration.
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