China's economy slows amid record debts

China’s economy has lately exposed signs of cooling due to a string of recently important economic announcements disappointing.

According to the August reports, besides the reduction of bank loan, shrinking export data which fell by 10% to the 21-month low of 5.5%, and low-cost labor asking for higher wages, most recent economic data releases have been reported below trader’s expectations. For example, industrial production’s growth rate dropped to 6.0%, the lowest level since December 2016, from its previous report of 6.4%. Fixed asset investment slightly advanced by 7.8% in the January-August period, the lowest rate in more than nine years, while retail sales figures decreased to 10.1% from the August release of 10.4%, followed by the 10.5% report in July.

“The slowing trend in real retail sales across the past two months came despite consumer confidence rising further in July – up to 114.6 points – the highest level in over two decades,” reported Fxstreet.

“It was a surprise to us that the growth rate in fixed-asset investments came down so speedily, mostly due to the weakness in the construction sector,” said ING’s Greater China Economist Iris Pang. He also appraised that the slowdown in retail sales could be because of tepid jewelry sales.

According to a UBS analyst team, in addition to the recent strengthening of the Chinese Yuan which put a dent in PRC’s economic growth (People's Republic Of China), the world’s second-largest economy has also suffered from a sharp slowdown in the credit momentum lately. The credit crash was nearly 14% in July – a record data among world’s top-tier economies. On the other hand, PRC’s debt burden has approached 300% of Gross Domestic Product (GDP). This country every month has to consume about 1.2 trillion yuan of new loans with maintenance costs reaching 10% of GDP.

Nevertheless, the Chinese economy seems still on track to target government’s expectations of a 6.5% growth for this year. China’s GDP advanced by 6.9% in the April-June period of 2017, same as the first quarter. The consumer price index (CPI) impressively climbed to 1.8% from the July announcement of 1.4%, the highest level since the beginning of the year according to National Bureau of Statistics, while the producer price index was confirmed at 6.3% in August, rising from the release of 5.5% a month earlier.
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