China’s Factory Production Moderate Amid Credit Control

Chinese factory production cooled in October as the campaign for credit control deepened. Factory output rose 6.2 percent year-on-year in October, down from 6.6 percent recorded in September. While this showed steady growth in the world’s second-largest economy, it is below the 6.3 percent expected by most economists.

“Today’s data look a little slower because we had better readings in September, but it doesn’t indicate the economy’s going down,” said Gao Yuwei, a researcher at Bank of China Ltd.’s Institute of International Finance in Beijing. “China will end the year with a good performance.”

The government has indicated its readiness to focus on the quality of growth rather than the pace of growth at the Party Congress in October. This means the government is unlikely to stimulate the economy any further, especially after Zhou Xiaochuan, the Governor of People’s Bank of China announced at Group of 30 seminar in Washington last month that high business debt remains a concern in China.

“We need to pay further effort to deleveraging and strengthen policy for financial stability,” Zhou said.

Since the government stated its commitment to rein in on credit risks and cut down on extreme air pollution, factory production has been impacted and experts believe this would weigh on fourth quarter overall growth.

However, the economy is on track for its first full-year acceleration in seven years after posting 6.9 percent growth rate in the second quarter and 6.8 percent in the third quarter.