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<\/p>\nIndustrial production grew 5.2 per cent in August, its lowest growth rate in a year, against 5.7 per cent in July.<\/p>\n
Fixed asset investment grew only 0.5 per cent, its weakest growth rate since the pandemic, reflecting both the continuing slump in real estate investment \u2013 which was down 12.9 per cent in the first eight months of this year relative to the same period last year \u2013 and weaker private investment more broadly.<\/p>\n
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China\u2019s ongoing property slump is spreading through the economy.Credit: AP<\/p>\n
Property prices continue to fall \u2013 they fell 0.3 per cent in August, relative to July \u2013 as they have done for nearly 3\u00bd years. They are down 3 per cent year-on-year, although the prices of new homes do appear to be stabilising at their lower levels. The secondary market for homes remains under pressure.<\/p>\n
The continuing slump in the property market is also impacting other sectors and markets.<\/p>\n
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Crude steel production has fallen for the past three months and was down 0.7 per cent in August, which is reflected in relatively subdued iron ore prices. There is nothing in China\u2019s data that offers relief for the major iron ore miners.<\/p>\n
BYD, China\u2019s leading carmaker and one of its few profitable auto companies, last week reported a 30 per cent plunge in profit and cut its forecast of deliveries for this year from 5.5 million vehicles to 4.6 million, which provided a quite dramatic insight into the wider problems of sluggish domestic demand and the massive over-capacity within China\u2019s industrial base.<\/p>\n
BYD has led a series of price cuts in a sector plagued by that over-capacity, intense domestic competition and heavy losses.<\/p>\n
The torrid domestic conditions have resulted in a flood of Chinese electric vehicles hitting export markets, where margins can be double or triple those available within China, igniting a growing backlash from governments anxious to protect their own auto industries.<\/p>\n
Beijing is trying to force consolidation on those industries \u2013 many of them, like EVs, solar panels and semiconductors, whose growth was encouraged and subsidised by the government as part of China\u2019s long-term economic strategy to dominate key industries \u2013 because they have created a misallocation of resources and capital and have contributed to the deflation experienced over the past three years.<\/p>\n
Producer prices fell 2.9 per cent, year-on-year, in August, so the deflationary pressures are continuing.<\/p>\n
The anti-involution measures Beijing is imposing are impacting investment and will affect employment levels (the official unemployment rate edged up from 5.2 per cent in July to 5.3 per cent in August).<\/p>\n
They will weigh on already-threatened exports and the economy\u2019s growth rate but are a necessary effort to reduce the structural imbalances within the economy and, perhaps, to reduce to some degree the trade tensions generated by the tide of cheap exports that is a product of the excess domestic capacity.<\/p>\n
While Beijing tries to deal with the structural issues within the domestic economy, it is also trying to negotiate a better trade relationship with the US.<\/p>\n
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China\u2019s leading carmaker, and one of its few profitable auto companies, BYD, last week reported a 30 per cent plunge in profit and cut its forecast of deliveries for this year from 5.5 million vehicles to 4.6 million.Credit: Bloomberg<\/p>\n
US and Chinese trade officials met in Madrid on Monday \u2013 their fourth round of trade talks this year \u2013 but their negotiations were mainly focused on the fate of TikTok, rather than tariffs. The US had made resolution of TikTok\u2019s ownership a pre-condition for more substantial trade talks.<\/p>\n