China's housing crisis deepens

China’s economy is showing little sign of recovery, with new stress on the property market and deflation threatening the growth outlook. Official data in China on Tuesday showed modest increases in industrial output, retail sales and fixed-asset investment in July from a year ago, even as growth rates are still well below pre-pandemic levels. Real estate investment has shrunk further as confidence is shaken by a possible default by a major developer and home sales continue to fall. Heavy rain and deadly floods in the southwest last month and more recently in northern China have likely hampered construction and infrastructure projects, limiting economic activity. The figures follow economic news last week that showed deflation set in in July as manufacturers and retailers slashed prices to lure buyers and move excess inventory. Exports and imports also fell more than expected, while consumer and business borrowing fell. Beijing has made several pledges and announced increased measures to support growth, but has refrained from the kind of monetary and fiscal stimulus it has used in previous downturns. A weaker yuan and higher debt levels have prompted more caution. The government also set a growth target of around 1% for the year, which is ongoing without major stimulus. The People’s Bank of China may keep its key policy rate unchanged at 2.65% on Tuesday, according to economists polled by Bloomberg.