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China industrial output up, retail spending weaker

 Smoking chimneys of a factory are seen Tuesday, March 3, 2009 in Shanghai, China. China's industrial output rose 11 percent in February from a year e...

China Economy

Smoking chimneys of a factory are seen Tuesday, March 3, 2009 in Shanghai, China. China's industrial output rose 11 percent in February from a year e...

China's industrial output rebounded in February as a massive government stimulus effort took effect but consumer spending weakened, highlighting the challenge of reviving growth in the world's third-largest economy.
Industrial production rose 11 percent in February from a year earlier, driven by a 42.5 percent jump in concrete production, China's statistics bureau said Thursday, showing the impact of the stimulus on new highways and other public works. Vehicle sales, bank lending and investment in factories and other fixed assets also have risen.
"The positive effects of the government's aggressive stimulus measures are gradually becoming apparent," Jing Ulrich, JP Morgan's chairwoman for China equities, said in a report to clients.
The mixed signals highlight the challenge that Beijing faces in trying to boost growth. Economists say the 4 trillion yuan ($586 billion) stimulus alone cannot fill the gap left by plunging Chinese exports and the government must persuade its own uneasy consumers and companies to spend more.
February's industrial output growth was an increase over December's 5.9 percent and November's 5.4 percent _ the low point of the recent slowdown in output.
At the same time, growth in retail sales slowed to 15.9 percent over January and February from December's 17.4 percent growth and 22 percent in October, the statistics bureau said.
"It seems clear the domestic demand is slowing in China, and this could be happening at a faster pace than the sales data suggest," said Moody's analyst Sherman Chan in a report. "Having households pull back on spending is exactly what China does not need."
Beijing is trying to prod consumers to spend more with measures that include subsidizing appliance purchases for rural families. But families save heavily for education, health care and other expenses, and analysts say they are unlikely to spend more on consumer goods until Beijing creates a social safety net to ease such burdens.
A market research company, DDMA, said a February survey found 45 percent of those polled had cut back on spending, down from 7 percent in January.
"Economic concerns are now very much ensconced at the top of the list of most important consumer concerns," said a report by the Shanghai-based company.
China's trade decline accelerated in February as exports plunged 25.7 percent from a year earlier. The commerce minister warned this week the outlook for coming months was grim.
Beijing set an 8 percent growth target for 2009 but private sector analysts say the expansion could be as small as 5 percent. That would be the strongest for any major economy but a sharp drop from last year's 9 percent at a time when communist leaders worry that mounting job losses could fuel unrest.
The rise in industrial production also was driven by a 22.9 percent increase in vehicle output, the statistics bureau said. China's auto industry group says sales of domestically made vehicles surged by 25 percent in February following a sales-tax cut on small cars as part of the stimulus.
Also Thursday, the central bank reported that Chinese banks lent 1.1 trillion yuan ($160 billion) in February _ a 300 percent increase from a year earlier _ as state companies and government agencies borrowed to finance stimulus projects.
"Banks are surely funding a large amount of bad investments _ or they would have made the loans already _ so this could leave a large swathe of nonperforming loans down the road," said Chan of Moody's "More measures to encourage household spending would help the economy on a more sustainable growth path."
AP Business Writer Elaine Kurtenbach in Shanghai contributed to this report.

Updated : 2021-12-07 08:31 GMT+08:00