Worry for China as industrial growth falters

Beijing: China's economy showed further signs of weakness last month, with industrial output posting its slowest growth in 17 years, placing further pressure on the government as it tries to steady the ship while battling a trade war with the US.

The authorities have for years been attempting to transition the world's number two economy from a reliance on state investment and exports to a more stable model driven by consumption, with the tariffs stand-off complicating that mission of late.

Retail sales actually beat expectations, rising 8.6 per cent year-on-year in May, the National Bureau of Statistics (NBS) said on Friday. That compares to an 8.1 per cent increase forecast in a Bloomberg poll of analysts.

But the National Bureau of Statistics also said industrial output rose just 5.0 per cent, the slowest increase since 2002, and missing a 5.4 percent analyst forecast.

Fixed-asset investment growth also underwhelmed with 5.6 per cent growth. The readings are likely to fan speculation that authorities may launch another round of stimulus.

Beijing has rolled out huge tax cuts and other measures this year to try to blunt the impact of a trade war, which has seen the US impose tariffs on hundreds of billions of dollars worth of Chinese goods, causing worries for exporters.

China's exports beat gloomy forecasts to rebound somewhat in May, though imports sank more than expected, according to official data released earlier in the week. But the overall downward trend gives Xi little room to fight back forcefully against the United States, which is using tariffs as leverage to try to force China into opening up its economy.

ANZ Research said it expected further gloom ahead and revised down its 2019 estimate for Chinese economic growth. "The economic data coming out of China over the past two months have not lived up to our expectations," it said in a commentary on Friday.

It had adjusted its gross domestic product growth forecast to 6.2 per cent for 2019, from a previous estimate of 6.4 per cent.