Lower China factory output prompts stimulus hopes

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Lower China factory output prompts stimulus hopes

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China’s factory output growth slowed unexpectedly in July.

It was the weakest in more than three years hit by the effects of the eurozone debt crisis and a sluggish recovery in the United States.

Economists now expect further interest rate cuts and other stimulus measures from the Beijing government to support an economy that has seen growth sliding for the last six quarters.

President Hu Jintao and Premier Wen Jiabao have promised to step up policy “fine tuning” in the second half of the year to support the economy

Annual consumer inflation, meanwhile, fell to a 30-month low last month, suggesting that the central bank has ample scope to ease policy further after cutting interest rates in June and July.

“We think the weakness will be more stubborn than people had expected,” said Li Wei, China economist at Standard Chartered Bank in Shanghai. “My view is that political rhetoric is losing its effectiveness in boosting confidence and you need actual actions to boost growth.”