China's economy grows 6.9 per cent in first quarter of 2017

Gladys Abbott
April 21, 2017

It is encouraging to see credit growth slowing to a less unsustainable pace; an extended period in which nominal GDP growth outpaced credit growth would greatly allay concerns about the sustainability of China's growth model. "We need to watch closely whether China's top leadership will send a stronger signal to tighten monetary policy shortly".

The Bureau credited the government's commitment to reforms in economic development and the supply-side structure to helping the national economy "getting off to a good start" and "laying a solid foundation "for meeting the yearly growth target".

The latest round of restrictions came after more than two years of policy easing, starting with relaxation of purchase restrictions in 2014 and fueled by the pro-growth policies, including interest rate cuts. In the first quarter, the value added of strategic and emerging industries went up by 10.3 percent year on year, 3.5 percentage points faster than that of the industries enterprises above designated size.

First-quarter growth was largely driven by high levels of government investment in infrastructure and a recovery in exports, according to Evans-Pritchard.

The economy of China grew 6.9% in the January-March period of 2017, as per the Chinese government data, beating estimates in the recent indication of stabilisation of the second-largest economy of the world. Real estate investment remained strong, expanding by 9.1 percent in the first three months.

"Sales have started falling, which means tightening measures are starting to take effect", said Shen Jianguang, an analyst at Mizuho Securities in Hong Kong, noting that will start to drag on both the services and construction sectors.

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That is slower than 1.7 percent in the fourth quarter of previous year.

Speaking at a press conference on Monday, NBS spokesperson Mao Shengyong admitted that the influence of China's property controls will gradually become evident in April and the following months as they were only introduced in mid-March.

The rate also sensibly exceded 5.8 percent of the first quarter in 2016, and of six percent for all of that year, detailed the Bureau.

Retail sales grew 10.9% in March from a year earlier, accelerating from a 9.5% increase in February. China's long-ailing industrial sector has been posting its best profits in years, thanks to higher prices for steel and other building materials, giving "smokestack" industries more cash flow to pay off debt and invest in more efficient plants. That was up from a 32.5% share in February, albeit still down from more than 70% late a year ago.

"This is good for now but it makes it hard to see how China's economic slowdown will land in the future".

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