China's Attempt to Create Blue Skies for Parade May Slow Growth, Nomura Says

(Bloomberg) -- China’s efforts to create blue skies for the celebration of its Oct. 1 national day could temporarily reduce industrial activities and cut output by as much as 0.5 percentage point this month, according to Nomura International Ltd.

The government is likely to take some strong action in Beijing and the surrounding regions to ensure an “azure sky” for the ceremony, Nomura Economist Lu Ting wrote in a note dated Sept. 2. The surrounding regions are heavily industrialized and concentrated in the steel-making sector, and any temporary shut down of factories would slow production.

China often shuts down industry around large-scale events such as the the annual parliament or 2014‘s APEC meeting to ensure clear skies. But it comes at a particularly bad time for the economy, as China is already grappling with weak domestic conditions, worsening tensions with the U.S. and a slower global economic outlook.

China’s industrial output rose 4.8% in July from a year earlier, the slowest monthly expansion since 2002. A set of early indicators collated by Bloomberg showed the weak trend is set to continue, and the outlook for China’s manufacturing deteriorated, as seen in the further contraction of the purchasing managers’ index .

“The incoming ‘parade blue’ may reduce national industrial production by as much as 0.5 percentage point in September,” Lu wrote. Still, the disturbance should have “a limited long-term impact” as there could be some pent-up output and investment afterwards, he wrote.

To contact Bloomberg News staff for this story: Miao Han in Beijing at mhan22@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Jiyeun Lee, James Mayger

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With assistance from Bloomberg