Chinese market worsens as growth stumbles
China's old growth model is spluttering.
Cement output plunged 21pc in March from a year earlier, electricity output dropped 3.7pc, and crude steel fell in the first quarter for the first time in 20 years.
The declines are symptomatic of sliding investment in homes, the once vital engine that powered China's economy. Property investment growth slowed to 8.5pc in March, the National Bureau of Statistics said Wednesday, the slowest since early 2009 when China was hit by the global recession.
"When we are talking about China's slowdown, we're talking about the rapid declines in the traditional industries of property and steel for instance," said Zhu Haibin, the Hong Kong-based chief China economist for JPMorgan.
"It takes time for new industries to take over -- the so-called new sectors are at best stabilizers, not new growth engines," Zhu added.
China's economy expanded at the weakest pace since 2009 last quarter, putting additional pressure on Chinese Premier Li Keqiang to roll out more pro-growth policies.
With looser restrictions on home purchases, two interest rate cuts and a reduction to the amount of reserves banks need to set aside not reviving the property market, question marks over policy makers' ability to turn things around are rising.
"In the past, the government could just start new infrastructure projects and overall investment would be good, but now additional spending on infrastructure will barely offset the weakening property market," said Xu Gao, the chief economist of China Everbright Securities in Beijing who previously worked at the World Bank.
"China has to relax property policies further to aid growth, he added.
Yu Bin, a researcher with the Development Research Center, a study arm under the State Council, said at a press briefing this month that real estate investment will slow to 7pc in 2015. JPMorgan's Zhu sees a deeper slide to 6pc, wiping out about 0.6pc from headline GDP growth.
While housing's influence is pervasive, driving sales of everything from cement to steel, electrical appliances, furniture and cars, the news Wednesday was not all bad.
"With growth of wages and household income holding up well, robust consumption growth remains an important buffer against a deeper overall economic slowdown," said Louis Kuijs, RBS chief economist for Greater China in Hong Kong. (Bloomberg)