Asia: China slides on liquidity concerns

China's main benchmark fell 0.4% on concerns about tightening liquidity as Premier Li Keqiang revealed the money supply had risen in August by its slowest rate in five months, while bourses across Asia were also hit by speculation that a possible interest-rate hike in the US may come sooner than estimated.

Speaking ahead of the summer World Economic Forum, Li said that China would focus on reform instead of stimulus, adding that the central committee would continue its prudent monetary policy and "targeted control measures".

Shares in companies in most Chinese industrial sectors pulled back especially manufacturing companies, which will be hit by a new committment to improve country's pollution problems.

A statement from the committee said reforms will focus on "investment management, greater simplification of administrative approval procedures and further delegation of power, as well as opening up monopolized sectors to competition", according to news aganecy Xinhua.

"Fiscal and financial resources will be used more effectively to support the real economy and more financing channels will be explored. Authorities will expand effective investment and attract more private investment; efforts will be made to expand domestic consumption," the agency reported.

Japanese core machinery orders and the corporate goods price index both came in slightly lower than expected, however the data is notably volatile and the consensus forecasts distribution was broad. The Nikkei opened weaker following the releases but finished the session 0.25% higher.

Capital Economics put out a note declaring its scepticism about recent claims that productivity in China has started to fall. "If it were true, we’d be slashing our medium-term growth forecasts. But the reality is not so dire," analysts said.

Responding to the recent total factor productivity (TFP) estimates by economics professor Harry Wu, which have inspired some gloomy headlines, chief Asia economist Mark Williams stressed that TFP put too much emphasis on cyclical shifts such as taking up of spare capacity.

Williams argued that more direct measures than TFP suggested that some key parts of China’s economy, such as exporters, were seeing strong productivity growth despite the rapid wage gains and renminbi appreciation.