BEIJING (Reuters) - China's economy cooled further last month, with industrial output, fixed asset investment and retail sales missing expectations as the government extended a crackdown on debt risks and factory pollution.
Beijing is already in the second year of a campaign to reduce high levels of debt as authorities worry that riskier lending practices, especially in the real estate sector, could imperil the economy.
Data on Tuesday pointed to moderating growth over the next few quarters as credit expansion slows, with year-on-year industrial output gain of 6.2 percent in October missing analysts' estimates of a 6.3 percent rise, and below a 6.6 percent increase in September.
Fixed-asset investment growth slowed to 7.3 percent in the January-October period, the National Bureau of Statistics (NBS) said. Analysts had expected an increase of 7.4 percent.
"The moderation in activity data released today suggests that growth slowed in October and adds to our conviction that it will continue to do so in the quarters ahead," Nomura analysts wrote in a note to clients.
China's economy has surprised financial markets with robust growth of nearly 6.9 percent in the first nine months of this year, underpinned by a recovery in its manufacturing and industrial sectors thanks to a government-led infrastructure spending spree, a resilient property market and unexpected strength in exports.
That has supported the world economy as the Asian giant has continued to hoover up commodities and consumer goods, helping to stoke underlying global demand for cars and smartphones to TVs and industrial products.
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But the world's second-largest economy has started to show signs of fatigue, with momentum seen slackening further as Beijing's crackdown on debt risks curbs demand and tighter pollution rules hits factory output.
China's exports and import growth both eased in October, while the smog war dragged on manufacturing activity last month.
To be sure, data has yet to point to any marked deceleration in economic growth, and analysts see only a modest loss of momentum over the next few months. Indeed, China's producer prices were surprisingly strong in October, despite muted activity during the golden week holiday.
Profits for the country's industrial powerhouses surged 27.7 percent in September, the most in nearly six years, as environmental inspections and the start of plant closures in smog-blighted northern provinces sparked fears of supply shortages and sent prices of finished goods like steel and copper sharply higher.
Alibaba, the Chinese e-commerce giant, said on Saturday it hit $25.4 billion in sales from China's Singles' Day - an annual 24-hour buying frenzy that exceeds the combined sales for Black Friday and Cyber Monday in the United States and acts as a barometer for China's consumers. The final sales total from the event was more than the GDP of Iceland or Cameroon.
QUALITY OVER SPEED
The latest data showed the positive retail sector impulse has started to ebb.
Retail sales gained 10 percent in October on-year, versus an expected 10.4 percent rise and below the 10.3 percent growth in September.
Private sector fixed-asset investment slowed to 5.8 percent for Jan-Oct, compared to 10.9 percent growth in investment by state firms. Private investment rose 6.0 percent in the previous period.
Real estate investment growth also cooled in October, hit by government curbs on the sector. Data on Monday showed China's new loans fell more than expected in October to their lowest in a year as banks tightened mortgage lending and corporates continued to shun bank loans.
Analysts say the fiscal stimulus might also be pared back.
Julian Evans-Pritchard, China economist at Capital Economics, said the economic impact of debt curbs and capacity closures to meet environmental standards were partly offset by strong infrastructure spending.
"But this support seems unlikely to last given that local governments are set to reduce spending in the final months of the year in order to meet budget targets."
At China's recently-concluded Communist Party Congress, President Xi Jinping said the country would focus on quality over speed as it pursues economic growth, and reinforced a pledge to win the war on pollution and clamp down on riskier types of lending.
That leaves policy makers walking a tight rope as China continues to rebalance its economic drivers away from investment and exports toward domestic demand.
Monetary conditions have largely remained firm, with the People's Bank of China keeping liquidity tight through much of the year by raising short term rates.
Most China observers say Beijing would not risk a sharp slowdown in growth through its debt and pollution clampdown given the government's major focus on creating jobs and fostering social stability.
Many analysts expect that even with some loss of momentum in the fourth quarter, China's economic growth will easily meet or beat the government's full-year target of around 6.5 percent.
"At the end of the day, China still intends to strike a balance between growth, debt and leveraging," said Zhou Hao of Commerzbank in Singapore.
"That said, we need to prepare for some downside bias for the trade and activity data in the coming months."
(Reporting by Cheng Fang and Kevin Yao; Writing by Sue-Lin Wong; Editing by Shri Navaratnam)