Apr. 15th, 2016 12:09 P.M Source: FT Chinese
China’s economy grew at 6.7 per cent in the first quarter of 2016, down slightly from the end of last year but comfortably within the government’s targeted range, as housing and infrastructure cushioned a slowdown from financial services.
The latest growth figure for gross domestic product growth is the slowest since the depths of the financial crisis in the first quarter of 2009 and down from 6.8 per cent in the fourth quarter. Economists had expected 6.7 per cent growth, according to a survey by Wind Information, a Chinese financial data provider. In March, China’s parliament approved a full-year growth target of 6.5-7 per cent, down from last year’s target of “around 7 per cent”.
Still, the data add to a picture of a Chinese economy that is broadly stabilising after a slowdown in the second half of last year. The International Monetary Fund recently revised its full-year growth forecast up to 6.5 per cent from 6.3 per cent. Trade data released on Wednesday showed imports and exports beating expectations in March.
The data suggest that policy moves to boost the housing market and increase fiscal spending on infrastructure have gained traction. Fixed-asset investment grew 10.7 per cent for the year to March, well ahead of expectations and the strongest year-to-date growth since August. Property investment grew at 6.2 per cent, its fastest pace in a year.
But analysts warn that the recent recovery may not be sustainable without further stimulus measures.
“The tried and tested stimulus measures of recent months have stirred up the physical part of the economy, especially towards the end of the first quarter, while consumption remained relatively robust,” Louis Kuijs, Asia economist for Oxford Analytics, wrote on Friday.
“However, we do not expect the housing construction pick-up to turn into a sustained recovery . . . The government will need to continue to rely on stimulus, notably infrastructure investment, to prevent growth from falling below its overly ambitious medium-term growth target of 6.5 per cent next year.”
Services continued to drive growth, with the sector expanding 7.6 per cent in the first quarter compared with 5.8 per cent for industry. But that marked a slowdown from the previous quarter, when services grew 11.9 per cent.
A detailed breakdown of services growth is not yet available but analysts say financial services probably slowed sharply in the first quarter. China’s stock market boomed in the first half of 2015, leading to a huge increase in brokerage commissions, boosting overall services growth. Given this high base of comparison, year-on-year growth in financial services almost certainly slowed sharply in early 2016.
But real estate has helped take up the slack. After a property slump that began in early 2014, property prices, sales and construction have recovered in recent months, especially in major cities. Friday’s data showed property sales soaring 33.1 per cent in floor-area terms in the first three months.
That is positive news for the broader economy, which relies on property to drive demand for steel, base metals, cement and glass, among other commodities.