China Economic Gloom Takes a Breather—for Now

China’s economy is moving a little bit closer to the safety of the middle of the road. Unfortunately, it is likely to be back on the edge before long

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China’s economy is moving a little bit closer to the safety of the middle of the road. Unfortunately, it is likely to be back on the edge before long.

The latest crop of official Chinese data for August points to an economy gaining a bit of traction—or at least not getting worse. Fixed-asset investment overall grew 8.1% on a monthly basis from the year before, a rebound from July’s 3.9%, but historically very weak. Industrial production expanded 6.3%, more than July’s 6% but, again, not exactly robust.

There was better news on the consumer side of things. Home sales, fueled by a boom in mortgages, continue to hum along, growing 33% from a year earlier. And, reassuringly, unsold inventories nationally are edging down, dropping on a year-on-year basis for the first time since data began to be reported consistently in 2010.

Despite the property-sales rebound, however, developers aren’t responding by building more, which in the past has been a jobs and activity engine. New floor space under construction rose just 3%, the slowest pace in eight months.

Car sales are growing by a quarter from the year before, the fastest in over five years. Yet some of that demand has been brought forward by a temporary sales-tax cut on smaller cars. When the tax cut ends at year’s end, so will the robust sales growth.

When a temporary sales-tax cut ends, it will take with it robust growth in car sales. Shown, electric cars at an auto factory in China. PHOTO:REUTERS
China’s current mini rebound seems to fit a disconcerting pattern of recent years. A big dose of credit leads to a slight, but reassuring, uptick in activity, followed by a deeper slump, as the economy, dealing with too much debt and overcapacity, continues its slide. That pattern shows no real signs of being disrupted.

Write to Alex Frangos at alex.frangos@wsj.com

http://www.wsj.com/articles/china-economic-gloom-takes-a-breatherfor-now-1473745007

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One Response to “China Economic Gloom Takes a Breather—for Now”

  1. daveyone1 Says:

    Reblogged this on World Peace Forum.

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