Government sources say slowdown follows restrictions in real estate market to hold in check speculative bubbles. However, some fear another global economic crisis. Experts call for a review of development model.

Beijing (AsiaNews/Agencies) – China’s manufacturing contracted slightly in July for the first time in more than a year, following a government clamp down on property speculation and trims on credit growth. However, the picture is more complex; in fact, despite the drop China’s passenger-car sales grew at a faster pace in July. The inflation accelerated as well. For experts, the country’s entire development model must be re-examined.

The HSBC China Manufacturing Purchasing Managers Index fell to 49.4 in July from 50.4 in June. Since the expansionary threshold stands at 50, July saw a slight decline. Nonetheless, overall growth is expected to be around 11-13 per cent.

HSBC economists Qu Hongbin and Sun Junwei expect the economy to continue to expand but at a lower pace, around 9 per cent in the second half of 2010 and in 2011 thanks to robust private consumption and sustained demand for infrastructure and public construction projects.

Other data confirm that domestic demand is not declining. Passenger-car sales rose by 15.4 per cent in July over June, because of government subsidies and tax breaks (3,000 yuan, around US$ 450) on fuel-efficient models and dealers’ discounts to clear inventories in the world’s biggest automobile market.

China’s car prices fell 1.2 per cent in the first half from a year earlier, whilst car sales began growing at a slower pace in April.

Total auto sales in China, including trucks and buses, increased 17 per cent from a year earlier to 1.06 million vehicles in July.

China’s inflation also accelerated to 3.3 per cent last month from 2.9 per cent in June. Its impact on food prices is especially significant—pork prices for instance rose 7.1 per cent in July from a month earlier.

The slowdown in China’s economic growth comes at a time when the US economy is also showing signs of slowing down. This could bode ill for the global economy, experts say, especially since Asia, in particular China, remains the driving force in the world economy this year.

Other analysts suggest that the real problem is not short-term changes, which are often affected by public spending and subsidies, or high taxes to counter speculative bubbles, but rather the overall model of development, based on cheap labour and high social and environmental costs. A system based on large companies always generating high profits is no longer realistic.

• china
• manufacturing
• industrial
• output
• inflation
• food
• development
• model