China's factories and workshops saw their output slow sharply in April, data showed today, as the world's second-largest economy grapples with tighter credit and weaker demand. The data comes as China hosts an international summit showcasing its Silk Road project which it hopes will revive ancient trading routes and breathe life into its sputtering economy. Industrial production rose 6.5 per cent from a year ago, the National Bureau of Statistics said, compared with 7.6 percent in March and analyst estimates of 7 percent. Other figures also disappointed.
April retail sales rose 10.7 per cent year-on-year, below the previous month's reading and market forecasts of 10.8 per cent. Fixed-asset investment excluding rural areas rose 8.9 per cent in the first four months of the year, compared with 9.2 per cent in the January to March period. "All the data sends the same message: The economy slowed down meaningfully in April," Larry Hu, head of China economics at Macquarie Securities in Hong Kong, told Bloomberg News. "But given that growth is still fine, in the second quarter policymakers will still focus on reducing financial risk." China's One Belt, One Road initiative -- a massive network of ports, railways, roads and industrial parks in Asia, Europe and Africa -- could provide fresh impetus for growth in the Asian giant. In recent years China has been transitioning from an investment-driven economic model to one more reliant on consumer spending but it has been a bumpy ride. The crucial manufacturing sector is also struggling in the face of weaker global demand and excess industrial capacity left over from a debt-fuelled infrastructure boom. Years of unregulated and risky lending has also raised fears of a looming debt crisis that the International Monetary Fund has warned could "imperil global financial stability". The banking regulator recently unveiled measures aimed at reining in risky lending and strengthening institutional transparency and chronically weak internal controls. But analysts have expressed scepticism about Beijing's willingness to quit its debt addiction given freewheeling credit conditions have underpinned the growth China's Communist Party relies on for political legitimacy. In the first three months of the year China expanded by a better-than-expected 6.9 percent, raising hopes the economy was stabilising after the 2016 growth rate of 6.7 percent, which was the slowest in a quarter of a century. Still, further deceleration is expected this year after the government announced in March a trimmed 2017 GDP growth target of "around 6.5 per cent".
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