Robust China growth shows signs of fading in July but retail still strong

China's strong economic growth showed visible signs of fading in July as lending costs rose and the gravity-defying property market cooled, though activity levels generally remained solid, propped up by a year-long construction spree.

Industrial output, investment, retail sales and trade all grew less than expected last month, after the world's second-largest economy put in a surprisingly strong showing in the first half, adding fuel to a global recovery. But economists do not expect any hard landing, with the government keen to ensure stability ahead of a once-in-five-years Communist Party leadership reshuffle in the autumn.

"The upshot is that both foreign and domestic demand appear to have softened at the start of the third quarter," said Julian Evans-Pritchard, China economist at Capital Economics.

Factory output rose 6.4 percent in July from a year earlier, the slowest pace since January, according to data from the National Bureau of Statistics on Monday. Analysts polled by Reuters had predicted output would grow 7.2 percent, down from a better-than-expected 7.6 percent in June.

In a sign that economic momentum could slow further, fixed-asset investment grew 8.3 percent in the first seven months of the year, cooling from 8.6 percent in the first half of the year. Analysts had expected the pace to remain steady. Property investment, in particular, showed signs of fatigue after local governments were forced into repeated rounds of cooling measures to curb soaring home prices.

The statistic bureau said the overheated property market has cooled "somewhat", but it still expected China's economic performance to be steady in the second half. The performance in July was stable, the bureau said.

Growth of private investment also ebbed to 6.9 percent in the first seven months of the year, suggesting small and medium-sized firms still face challenges in accessing financing. Private investment accounts for about 60 percent of overall investment in China.

Retail sales pulled back, too, but growth remained in the double-digits for the fifth month in a row, suggesting consumption will continue to overtake factory output and investment as the biggest growth driver of the economy, a key policy goal for Beijing.

Retail sales expanded 10.4 percent in July on-year, down from June's 11 percent and forecasts for a 10.8 percent rise. But while car sales remained solid, automakers cut back production.

Concerns about the outlook for domestic demand resurfaced last week after Beijing reported weaker-than-expected import and export data.

Though some economists chalked up softer imports to seasonal or one-off factors such as bad weather, others said it may be a sign that China's trade growth peaked in the second quarter and is now on a downward trend.

Beijing is targeting growth of around 9 percent in fixed asset investment for 2017, and expects retail sales to increase about 10 percent.