China's mighty economy still grows, but it slows

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The Independent Online

Fears of a property bubble and slower exports abide, but leading economic indicators on China, a vital engine of global growth, show that prospects are ticking up in the world's second-biggest economy.

China is trying to juggle efforts to combat rising inflation with the need to keep growth steady and ensure a "soft landing". The People's Bank of China said this week that growth was slowing as a result of the macroeconomic policies but insisted the economy's momentum remained "strong".

The Conference Board's leading economic index for China – which gauges prospects for the next six months – yesterday showed a rise of 0.4 per cent in September to 160.2, after a 0.6 per cent increase in both August and July.

"Economic activity in China remains robust, but that pace of growth should continue to ease in the near term," Andrew Polk, the Conference Board's Beijing-based economist, said.

Inflation in China struck its lowest for five months in October after a campaign to rein in prices that included raising interest rates and tightening credit. Economic growth slowed to 9.1 per cent in the last quarter, its lowest level since 2009.

Foreign direct investment (FDI) also appears to be slowing, although it is proving remarkably robust. Between January and October, China's FDI surged by 16 per cent to $95bn (£60bn), almost equal to 2010's total. Over this period, investment from EU nations, China's biggest trading partner, increased 1.05 per cent to $5.51bn.

Direct investment from the US fell, partly because of the economic slowdown there and partly as a result of the reshoring of manufacturing activity and the rising cost of labour in China. The sportswear giant Nike said recently that it now made more sport shoes in Vietnam than in China.

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