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Road to recovery? Chinese investment and output data set to signal state of nation’s economic health

A slew of Chinese economic data due out on Tuesday is expected to show whether the world’s second-biggest economy is on a firmer recovery footing.

The National Bureau of Statistics is due on Tuesday morning to release its readings of August’s fixed-asset investment, industrial production and retail sales. These are the key indicators of whether Chinese firms and households are speeding up economic activity, after last month’s purchasing managers index and trade data proved ­surprisingly strong.

At the same time, despite signs of cyclical improvement, fears ­remain about property bubbles in big mainland cities and the lack of progress on structural reform.

Ma Jun, chief economist of the research bureau at the People’s Bank of China, said in an interview with China Business News that many measures were needed to curb “bubbles” in the real estate market, and state-owned enterprises were still wasting money on poor investments.

“We can’t just give [SOEs] cheap money to make inefficient investments,” Ma said.

In general, there is cautious optimism among many observers over the country’s immediate economic outlook as the prices of industrial commodities, such as coal, are on rise.

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“The coming data could point to improving economic momentum and make it less urgent for policymakers to launch pro-growth stimulus policies in the fourth quarter,” Shanghai Securities analyst Hu Yuexiao said.

UBS economists said in a note that real economic activity was expected to show signs of stabilising last month after July’s weak reading. “August likely saw industrial production growth [was] marginally firmer, property sales still relatively robust, overall monthly fixed-asset investment slightly faster,” the note said.

Growth in fixed-asset investment may have slowed, but any easing would be modest, a survey of economists by Bloomberg found. “Fixed-asset investment is more likely to be propelled by infrastructure and property investment,” said Zhou Jingtong, a senior researcher at the BOC Institute of International Finance.

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Yet market watchers said ­August’s data alone was not enough to conclude that the slowdown was over. “Recent economic data has shown positive signs, but with a lot of uncertainties,” Zhu Haibin, JPMorgan’s chief China economist, said before the data’s release.

Fan Gang, an academic member of China’s monetary policy committee, told Bloomberg that the yuan would continue to weaken as the US dollar strengthened.

China’s economy grew by 6.9 per cent in 2015 – its lowest pace in 25 years – and it slowed to a rate of 6.7 per cent in the first half of this year.

Beijing has set an official gross domestic product target of ­between 6.5 per cent and 7 per cent this year.