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Robust China growth shows signs of fading in July but retail still strong

China's strong economic growth showed visible signs of fading in July as lending costs rose and the gravity-defying property market cooled, though activity levels generally remained solid, propped up by a year-long construction spree. Industrial output, investment, retail sales and trade grew less than expected last month, after the world's second-largest economy put in a surprisingly strong showing in the first half. But economists do not expect any hard landing, with the government keen to ensure stability ahead of a once-in-five-years Communist Party leadership reshuffle in the autumn.

The upshot is both foreign and domestic demand appear to have softened at the start of the third quarter, say economist. The statistic bureau says the overheated property market has cooled "somewhat", but it still expected China's economic performance to be steady in the second half. The performance in July was stable.

Growth of private investment also ebbed to 6.9 per cent in the first seven months of the year, suggesting small and medium-sized firms still face challenges in accessing financing. Private investment accounts for about 60 per cent of overall investment in China. Retail sales pulled back, too, but growth remained in the double-digits for the fifth month in a row, suggesting consumption will continue to overtake factory output and investment as the biggest growth driver of the economy, a key policy goal for Beijing.

Retail sales expanded 10.4 per cent in July on-year, down from June's 11 per cent and forecasts for a 10.8 per cent rise. But while car sales remained solid, automakers cut back production. Beijing is targeting growth of around 9 per cent in fixed asset investment for 2017, and expects retail sales to increase about 10 per cent.

 
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