| Slowing Down
Despite record high exports, China's industrial production slowed further in July amid government attempts to cool the economy. A range of measures implemented from April this year has been remarkably successful, and in few areas has this been more evident that in China's housing market, hitherto by many accounts a bubble ready to burst but now slowing down – just like the rest of the economy.
The month of July was a continuation of a general slowing tendency in China's economy. The official Purchase Managers' Index (PMI) of China's manufacturing index decreased from 52.1 in June to 51.2 in July, the lowest level in 17 months (see Chart 1). An unofficial PMI survey, published by HSBC, dropped to 49.4 in July (from 50.4 in June), hence below 50 and indicating a general contraction in economic activity.
Interestingly enough, China's exports increased by 38.1 percent year on year in July, and at $145.5 billion, the highest monthly value of goods ever exported by China (see Chart 2). Nonetheless, industrial production growth decreased from 13.7 percent year on year in June to 13.4 percent in July (see Chart 3). The ongoing drop in industrial production in China is closely linked to deliberate policies by the Chinese Government. In May, the government implemented new restrictions on a number of energy-intensive industries by limiting new projects and closing polluting plants. The government stimulus package first implemented in late 2008, moreover, has gradually been wound down from early 2010. Yet another area that has formed a crucial part of the impetus for cooling the economy is China's housing market. Having implemented a range of measures since April to control rapidly increasing property prices, the government can now point to some early success in this slowdown.
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