China economy loses more steam in April, further stimulus on the cards

Wed May 13, 2015 6:36am EDT
 
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By Kevin Yao

BEIJING (Reuters) - China's money supply grew at its slowest pace on record and investment growth sank to its lowest in nearly 15 years as April data showed the world's second-largest economy was still losing momentum despite a concentrated burst of policy easing.

Wednesday's data added to concerns that Beijing's growth target of around 7 percent for the year is already at risk, and reinforced views that authorities need to take bolder measures to head off job losses and debt defaults by local governments and companies.

The central bank is expected to follow this week's interest rate cut with more stimulus in coming months, while the government may ramp up spending to try to energize the economy, which looks set for its worst year in 25 years.

"It's again worse than what most people had expected, especially on the investment side. All of this suggests that the downward pressures on growth in China are persisting, especially in the industrial part of the economy," said Louis Kuijs, China economist at Royal Bank of Scotland in Hong Kong.

"This type of data will motivate policymakers to further ease on the monetary and fiscal sides."

The People's Bank of China (PBOC) has cut benchmark interest rates three times in the past six months, including a move early this week, on top of reductions in banks' reserve requirement ratio (RRR) and measures to shore up the ailing property market, which accounts for about 15 percent of the economy.

Kuijs has penciled in at least one more interest rate cut in the third quarter, coupled with more quantitative measures.

  Continued...

 
A man works at Pascal Lighting in Huizhou, Guangdong province, April 13, 2015. REUTERS/Alexandra Harney/Files