By Aileen Wang and Koh Gui Qing
BEIJING (Reuters) - China's economic activity showed across-the-board weakness in April, with data from output to investment and consumption all missing market expectations, sparking new calls for Beijing to ease policies to shore up growth.
Months of lacklustre performance and growing signs of weakness in the housing market have led some analysts and investors to question whether more stimulus is needed lest economic expansion this year fall short of the official target of around 7.5 percent.
China's central bank asked commercial banks on Monday to speed up the granting of home loans and to set mortgage rates at reasonable levels, sources told Reuters, underscoring concerns that any sharp deterioration in the property market could further strain the world's second-largest economy.
The most concerning data is fixed-asset investment, which grew 17.3 percent in the first four months from a year ago, the weakest pace since the government started a new statistics method in 2011. April industrial output data also disappointed the market, growing 8.7 percent from a year earlier versus market consensus of a rise of 8.9 percent, while retail sales also missed forecasts by rising 11.9 percent during the same period, the National Bureau of Statistics said on Tuesday. "If the government still views that achieving a 7.5% growth target is important for its credibility, China’s monetary policy will have to play its necessary role by easing further in order to help pull the economy out of a state of lethargy," said Liu Li-Gang and Zhou Hao, economists at ANZ, in a note to clients. Beijing has unveiled a slew of targeted measures so far this year to help shore up the economy, which dipped to 18-month low in the first quarter and is seen on track to post the weakest showing for 2014 in 24 years. Such measures include faster investment in railway and shanty town constructions, easing reserve requirements for rural banks and tax breaks for smaller firms. But economists said such steps are not dramatic enough to arrest a persistent slowdown in the economy, especially at a time when the slowing property market adds a significant new risk to the economy and the banking system.
"The number (fixed-assest investment) basically tells us the housing downturn has more than offset the investment push from the government so far," said Wei Yao, China economist at Societe Generale in Hong Kong. Revenues from property sales fell 7.8 percent in the first four of months of the year compared with the same period last year, Tuesday's data also showed. Real estate directly affects about 40 other industries in China and is considered a crucial pillar of the economy.
"April's transactions in Shanghai were around 20 percent lower than March; looking at the momentum now, April may not be the bottom yet, May and June could still be on a downtrend," said Clement Luk, chief executive of east China for Hong Kong-based Centaline Property.GOVERNMENT TOLERANCE Analysts' calls for an easier monetary stance seem run counter to the recent comments by policymakers, who have ruled out massive policy loosening, such as a universal cut in banks' reserve requirement. Central bank Governor Zhou Xiaochuan said on Saturday that the government would not use any large-scale stimulus to boost its economy in response to speculation that authorities might lower reserve requirements for banks to spur growth.
Separately, an academic advisor to the monetary policy committee repeated on Tuesday that there would be no big adjustment in monetary policy as Beijing needs to wait for more data in the coming months to decide on policy settings. Chinese top leaders has flagged on many occasions that they would be more tolerant of slower economic growth while they push ahead with structural reform to pursue a more sustainable growth model. In the latest indication of Beijing's determination to push reforms, Chinese President Xi Jinping had said last week the country must adapt to a "new norm" of economic growth and keep "cool-minded" amid a slowing economy. He also pledged to continue to coordinate the efforts of stabilising growth, promoting reforms, adjusting structure, improving people's livelihood and preventing risks so as to ensure sound economic growth and social stability. "Today's output and spending data from China paint a more downbeat picture about the economy than the consensus had expected, amid a continued slowdown of credit growth and weakness in real estate," said economists at Capital Economists in a note to clients. "But there are still enough positives for policymakers to remain 'cool-minded'," they added.
Recent factory surveys, though still weak, have hinted at some signs of stabilisation, while April trade data showed both exports and imports returned to slight growth as orders to the United States and European Union surged.
(Additional reporting by Clare Jim in HONG KONG: Editing by Kim Coghill)