Experts say more policy stimulus may be needed

Additional policy stimulus may be needed later this year to reinforce the growth momentum of the Chinese economy and support employment, as July data pointed to renewed downward pressures, economists and analysts said.

While extreme weather weighed on overall economic activity last month, the robust expansion in high-end manufacturing, resilient export growth and improving capital market sentiment have still pointed to a steady outlook for high-quality development, they added.

Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, said economic momentum remained stable but eased in July as domestic consumption and investment slowed amid high temperatures and flooding in some regions, the fading impact of consumption subsidies and the continuous adjustment in the property market.

"Looking ahead, to maintain the stability of the macroeconomy and the job market, major new stimulus measures might be introduced around the start of the fourth quarter," he said.

Possible measures could include stronger fiscal support, interest rate cuts and more forceful steps to stabilize the property market, Wang added.

The People's Bank of China, the country's central bank, pledged on Friday in its second-quarter monetary policy report that it will strive for better implementation of the moderately loose monetary policy, maintain abundant liquidity, reduce the cost of bank liabilities and promote a decline in overall social financing costs.

Figures released on Friday by the National Bureau of Statistics showed that the Chinese economy maintained its overall stability but showed signs of softening, with industrial output up by 5.7 percent year-on-year in July, down from 6.8 percent in June.

Retail sales, a key measurement of consumer spending, grew by 3.7 percent year-on-year in July versus a 4.8 percent rise in June, while the surveyed urban unemployment rate came in at 5.2 percent in July, up from 5 percent a month earlier, the NBS said.

"The foundation for economic recovery and improvement still needs to be consolidated," said Fu Linghui, spokesman and chief economist at the NBS.

Authorities should maintain policy continuity and stability, and focus on stabilizing employment, businesses, markets and expectations to promote steady and healthy economic development, Fu said.

Despite the headwinds, Fu said that China's economy has maintained a trajectory of stability with improvement, with innovation driving the growth of new economic dynamics and export resilience expected to be sustained by a string of favorable conditions in the second half.

The NBS data showed that the expansion of equipment manufacturing and high-tech manufacturing remained strong at 8.4 percent and 9.3 percent year-on-year in July, respectively.

China's goods exports expanded by 8 percent year-on-year in renminbi terms last month, up from 7.2 percent in June, the bureau said, with diversified export destinations, upgraded industrial capacity and policies to stabilize trade offsetting the impact of persistent trade protectionism.

Resilience is also evident in the robust performance of China's A-share market. The benchmark Shanghai Composite Index went up by 0.83 percent to close at 3,696.77 points on Friday, rising by 3.46 percent so far this month.

Wen Bin, chief economist at China Minsheng Bank, said he expects macroeconomic policies to continue bolstering the economy in the second half, with a focus on advancing key infrastructure investment projects and improving people's living standards, as reflected by the recent launch of subsidies for consumer loans and childcare.

Wen added that despite disruptions to economic activity in July, expansion in industrial production and services activity in the January-July period remained above 5 percent, keeping the full-year GDP growth target of around 5 percent within reach under sustained policy support.

zhoulanxv@chinadaily.com.cn