Slump shows ongoing pressure on economy: experts
China's railway freight industry saw a continued decline in cargo volume in the first 11 months of 2015, following a drop in the country's rail freight since 2013, according to media reports Monday.
Analysts said the persistent slump in rail freight, a key indicator of economic activity, showed that downward pressure is still weighing on the world's second-largest economy, and will continue to do so.
The country's railways carried a total of about 2.5 billion tons of cargo in the first 11 months of the year, 227 million tons or 11.63 percent less than in the same period last year, domestic business news portal caixin.com reported Monday, citing data from China Railway Corp (CRC).
The report said the rail freight volume in the first 11 months of the year was the smallest since the formation of the CRC in 2013.
In November, the total freight volume slipped 14.99 percent year-on-year, according to the report on caixin.com, following a 16.3 percent fall year-on-year in October, the Xinhua News Agency reported in November.
The slump in freight volume resulted in major losses for rail companies. CRC, China's largest rail firm, reported a fall in revenue of 17.4 billion yuan year-on-year in the first three quarters of the year, caixin.com reported.
CRC said that given the current economic climate, the continuous drop in rail freight is simply a "reality" and that it has "no more ways" to boost cargo volumes, according to caixin.com.
Rail freight volume started to fall in early 2013, and the slump has picked up pace since the end of 2014, caixin.com said.
Faltering demand
Analysts attributed the slump in freight volume to faltering demand, particularly for industrial products, which rely heavily on rail transport.
"The numbers directly reflect low demand in the real economy," said Liu Dongliang, an analyst at China Merchants Bank.
He noted the drop in rail freight showed that heavy industrial companies in the coal and steel sectors, which have been burdened by overcapacity, continue to face challenges.
It also shows the downward pressure that the country is still facing, Liu told the Global Times Monday, adding that rail freight is a primary indicator for the state of the country's real economy.
Downturn to continue
Even though consumption in the country is growing, the outlook for the economy is uncertain given the clouds hovering over investment and exports, two major driving forces for economic growth, Liu noted.
His view was echoed by Gao Ting, chief China strategist at UBS, who forecast that China's economy will continue to slow down in 2016.
At a press conference in Beijing Monday, Gao said a research team at UBS forecast a 6.2 percent growth rate for China's GDP in 2016, down from this year's growth rate of between 6.9 and 7 percent.
The team said the slowdown in the real estate sector and overcapacity in industrial and mining sectors will continue dragging on demand for industrial products and fixed-assets investment, according to a report Gao sent to the Global Times Monday.
China is expected to step up its support for funding infrastructure projects, but is unlikely to introduce a new round of "robust stimulus," the report said.
However, amid the structural adjustment going on in the country's economy, some sectors will prosper, such as services, whose proportion in the overall economy will continue to grow, the report said.
The report said the main downward risks include a possible credit crisis, a lack of "significant progress" in reforms, yuan devaluation and lower-than-expected stock market profit.
But areas that could help with recovery include the possibility of a breakthrough in reforms of State-owned enterprises, improved overseas market demand and a recovery in the real estate sector, it said.
