The country released data Monday that showed industrial production — an important indicator for China’s economy — increased by just 4.4% in August compared to a year earlier. That’s worse than the sector’s performance in July, when it grew by 4.8%, its weakest growth in 17 years.
Industrial production is important because it measures the output of key businesses in China’s manufacturing, mining and utilities sectors. The latest figure was also worse than the 5.2% growth that analysts polled by Reuters expected.
Other data released Monday by China’s National Bureau of Statistics was also poor. Retail sales growth slowed to 7.5% in August, down from July’s 7.6% year-on-year uptick.
The world’s second biggest economy has been struggling because of its trade war with the United States. It’s also facing domestic challenges as it tries to rely less on debt to fuel growth.
The soft August figures reflect an “increasing downside risk to the economy” as the trade war rages on, said Ken Cheung Kin Tai, chief foreign exchange strategist for Asia at Mizuho Bank in Hong Kong. “Against this backdrop, it makes sense that China softened its stance on trade talks” and introduced stimulus plans in recent weeks.
The weak data also fuels speculation about how China’s central bank will continue responding to the slowdown, Cheung added.
The People’s Bank of China has taken several steps in recent weeks to boost the country’s economy. Earlier this month, it reduced the amount of cash banks have to keep in reserve by slashing the reserve requirement ratio for the first time in eight months.
Tommy Wu, a senior economist for Oxford Economics, also said the country needs to take significant steps to stabilize growth. His firm forecasts the economy will grow 6.1% this year and 5.7% in 2020.
The People’s Bank of China could consider a cut to its medium-term lending facility rate, which is a key loan rate, said Ting Lu, chief China economist for Japanese investment firm Nomura. He also expects the government to loosen restrictions on the property sector later this year to help stimulate purchases.
Chinese officials have said they have enough tools available to bolster the economy.