Economy further stabilizes with booming new engines

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The Chinese economy stabilized last month as pro-growth measures propped up investment and industrial output and new economic engines continued to gather steam.

A string of data released Tuesday by the National Bureau of Statistics (NBS) showed the economic activity in better shape, albeit still under downward pressure.

China's fixed-asset investment grew 8.2 percent year on year in August, a huge increase from 3.9 percent in the previous month. Investment in the private sector, a concern for policymakers, expanded 2.3 percent, reversing two months of declines.

"Investment is on a more steady path," NBS spokesperson Sheng Laiyun said at a press briefing.

In the first eight months, fixed-asset investment rose 8.1 percent year on year, unchanged from the January-July period and ending a slowdown that had lasted for four consecutive months. Fixed-asset investment includes capital spent on infrastructure, property, machinery and other physical assets.

"Solid investment in property and infrastructure made the major contribution," said Zhang Jun, economist with Morgan Stanley Huaxin Securities. Both sectors have seen faster investment growth during the period.

The figures were among a series of encouraging economic indicators.

Value-added industrial output increased to 6.3 percent year on year last month, picking up from 6 percent for July and 6.1 percent posted for the same period of last year. The figure measures the output of companies with annual business revenue of more than 20 million yuan (US$3 million).

Consumer goods retail sales grew 10.6 percent year on year, up from 10.2 percent in July . Retail sales have started to contribute significantly to growth.

"Generally speaking, the improvement in major indicators last month showed positive changes, with progress in structural adjustment and new economic impetus," Sheng said. He added that employment was stable and factory activity recovering.

Echoing Sheng's remark, Bloomberg economist Tom Orlik said that the latest signs of stabilization suggested policy would continue to be aimed at longer-term reform and financial stability challenges.

Economic growth held steady at 6.7 percent in the second quarter, still the lowest level since the 2009 global financial crisis but within the government's target range for 2016..

Output in high-tech industries rose 11.8 percent from a year ago in August. New business registrations surged 28.9 percent in the first eight months. Internet shopping sales continues to grow well above 25 percent. "New services including online medical services, education and taxi-hailing are mushrooming," Sheng said.

But the NBS spokesperson said the government will remain clear-headed despite the improvement, due to uncertainties in global economic recovery, including a possible interest rate hike in the United States. "China's economic restructuring is at a crucial stage [...] and the downward pressure is still looming."

Responding to the situation, the State Council is about to launch a nationwide inspection, the third of its kind since 2014, to spur local implementation of reform and pro-growth policies later this month.

In the remainder of 2016, the government will strengthen fiscal measures and improve banks' lending to major projects in a bid to realize the official growth targets, Zhang said.

"As further interest rate cuts now appear unlikely, additional support for growth will continue to be channeled through fiscal policy," Orlik said, "The gradual shift to rein in excess credit growth, shadow banking, and real estate speculation will continue."

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