China’s GDP growth gets off on a sound footing in the first quarter

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China’s economy advanced in the first three months of this year, marking a second consecutive quarterly GDP expansion led by a pickup in investment, a rebound in the retail sales and government spending.

Data from the National Bureau of Statistics (NBS) showed on Monday this week that the world’s second-largest economy advanced at an annualized pace of 6.9% in the first quarter of this year. The data beat economists’ forecasts of a 6.8% expansion.

On a quarterly basis, China’s GDP was seen rising 1.3% compared to the previous quarter. The GDP growth rate was the fastest since December 2014, marking a 6-quarter high at 6.9% in Q1 of 2017. The data was a positive release amid a slow trading day which was marked broadly by risk aversion sentiment and some markets in Europe and the U.S. closed on account of Easter Monday holiday.

China GDP Growth Rate, Q1 2017: 6.9%
China GDP Growth Rate, Q1 2017: 6.9%

Data from the NBS shows that fixed asset investments excluding rural areas rose 9.2% on a year over year basis, advancing from an 8.1% expansion registered last year. Retail sales also accelerated at a pace of 10.9% from a year ago, up from 9.7% registered in the previous period. Lastly, industrial output jumped 7.6% in March, up from 6.3% registered in February.

The 6.9% GDP growth rate, sits comfortably close within China’s 2017 GDP growth target range of 6.5% – 7.0%. Economists were wary of China’s GDP growth rate which been consistently trending lower.

Commenting on the release, the NBS issued a statement where it said, that “the national economy maintained the momentum of steady and sound development from the second half of last year, getting off to a good start in 2017 and laying a solid foundation for accomplishing the whole-year growth target.”

China’s services industry maintains strong pace of expansion

In the first quarter, China’s index of national services production was registered at 8.3% on a year over year basis. It was a modest improvement from the previous year. Most of the industries in the services sector such as IT, software, transport and postal services maintained strong gains.

Lending support to the increase in the services sector was also a pickup in the wholesale and retail trade.

Fixed-asset investments maintains a steady pace of expansion

Fixed-asset investment excluding the rural households was registered at 9.2% on a year over year basis. This was 1.1 percentage points higher than the year before and 0.3 percentage points higher than the first two months.

Investments in the primary sector were seen advancing 19.8% year on year, while investments in the secondary sector advanced 4.2%.

Investments in the real estate development also continued to expand at a pace of 9.1%. The uptick in the real estate development continues despite the recent tightening measures in the sector.

The economic expansion in the first quarter was well cheered by economists who had otherwise expected to see a lackluster performance. The uptick in the GDP growth rate cements the recent string of indicators such as the producer prices index which has been posting a steady increase.

Consumer prices rose 1.4% on the year, which was about 0.7 percentage points lower compared to the inflation rate measured previously. Most the increases came from urban areas which registered a 1.5% increase in consumer prices.

China’s producer prices index, however, posted strong gains, rising 7.4% on the year posting a strong rebound in prices at the factory gate.

Following the release of the GDP figures, the policy markets are likely to shift to a neutral policy stance in a bid to ease the financial risk in the form of shadow banking and reducing the debt ratios in companies and the excess capacity in the industrial sector.


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