In new signs of slowing, China’s growth in factory output, company profits down

Official: China’s slowdown helping restructuring

BEIJING — In new signs China’s rapid rebound is slowing, the government said Tuesday growth in factory output and state company revenues has fallen and exports will weaken in the second half of the year.

A government spokesman said slower growth will help to promote efforts to make China’s energy-guzzling economy more efficient. But he acknowledged that exporters and small companies are facing tougher times.

“We face many difficulties in accelerating growth,” said Zhu Hongren, a spokesman for the Ministry of Industry and Information Technology, at a news conference. But he said the economy should avoid a “double dip” relapse in the second half of the year.

Economic growth slowed to 10.3 percent over a year earlier in the second quarter, down from its blistering 11.9 percent first quarter pace as Beijing wound down its huge stimulus and cooled a credit boom. Premier Wen Jiabao said last week Beijing intervened to slow growth to a more manageable pace and would try to maintain “fast and steady” growth.

The slowdown might weaken the global recovery if it cuts Chinese demand for imported iron ore, industrial machinery and other foreign goods.

Zhu said growth in factory output will decline further but might exceed this year’s official target of 11 percent. He gave no indication the government’s overall economic growth target of 8 percent will not be met. The International Monetary Fund and private sector analysts are forecasting annual growth of up to 10.5 percent.

Growth in factory output slowed in June to 13.7 percent over a year earlier, down 2.8 percent points from May’s expansion in the biggest monthly decline this year, Zhu said. He said that was due partly to official efforts to promote conservation and force obsolete factories and other facilities to close.

“Generally speaking, the slowdown of the industrial sector is moderate. It is good for industrial restructuring,” he said. “It is good for us to maintain steady and rapid industrial development.”

Also Tuesday, the agency that oversees China’s biggest state-owned banks, airlines and other major companies said their total revenue growth for the first half of the year was down 4.4 percentage points from that of the first five months.

The State-owned Assets Supervision and Administration Commission said the 126 companies it supervises made profits of 54.3 billion yuan ($7.9 billion) in the first half. It gave no growth rate for June or other details.

Chinese manufacturers face rising costs for materials and bigger wage bills after pay hikes this year following worker protests.

Zhu said exporters also face an uncertain market abroad as Europe’s debt crisis cuts demand in a key Chinese market.

“These business are worried about taking big orders,” Zhu said. “External demand is gradually recovering, but still we face many challenges in a solid global economy.”

Meanwhile, the Commerce Ministry said exports will weaken in the second half.

“Growth of external demand is slowing down,” said a ministry spokesman, Yao Jian, at a separate news conference. “Our export market has limited space to grow.”

Exports rose by a better-than-expected 35.2 percent in June over a year earlier but analysts expect growth to plunge in coming months. Yao declined to give any detailed forecast.

Associated Press researcher Bonnie Cao contributed to this report.