Hold­ing steady

De­spite slow­down fears, China’s eco­nomic growth boosted by trade and con­sumer spend­ing

The Guardian (Charlottetown) - - BUSINESS -

China’s eco­nomic growth held steady in the lat­est quar­ter, boosted by un­ex­pect­edly strong trade and con­sumer spend­ing, de­spite fears tighter lend­ing con­trols aimed at cool­ing a surge in debt are weigh­ing on com­mer­cial ac­tiv­ity.

Out­put rose 6.9 per cent in the three months end­ing in June from a year ago, data showed Mon­day. That was in line with the pre­vi­ous quar­ter and bet­ter than many fore­casts.

Com­mu­nist lead­ers are eager to keep growth steady as they head into a rul­ing party congress at which Pres­i­dent Xi Jin­ping is due to be reap­pointed as leader later this year. But the econ­omy faces head­winds as Bei­jing clamps down on lend­ing to rein in a surge in debt that has fu­eled fears it might harm the fi­nan­cial sys­tem or drag on growth.

Fore­cast­ers ex­pect the econ­omy to cool as those con­trols de­press in­vest­ment, the big­gest com­po­nent of growth in re­cent years.

“The econ­omy ap­pears to have ended Q2 on a strong note,” said Ju­lian Evans-Pritchard of Cap­i­tal Eco­nom­ics in a re­port.

“This strength seems un­likely to last, how­ever,” he wrote. “The re­cent crack­down on fi­nan­cial risks has driven a slow­down in credit growth, which will weigh on the econ­omy dur­ing the sec­ond half of this year.”

The In­ter­na­tional Mon­e­tary Fund has fore­cast China’s ful­lyear growth for 2017 to hold steady at last year’s level of 6.7 per cent. The IMF raised its out­look twice this year, cit­ing strong gov­ern­ment spend­ing.

The gov­ern­ment’s growth tar­get is 6.5 per cent “or higher if pos­si­ble.”

Con­sumer spend­ing and trade growth both ac­cel­er­ated dur­ing the sec­ond quar­ter, help­ing to off­set soft­en­ing in­vest­ment in fac­to­ries, real es­tate and other fixed as­sets.

Re­tail sales rose 10.4 per cent in the first half of the year, up 0.1 per­cent­age points from the first quar­ter’s rate, ac­cord­ing to the Na­tional Bureau of Statis­tics. Fac­tory out­put rose 6.9 per cent in the first half, up 0.1 per­cent­age points from the first quar­ter rate and 0.9 per­cent­age points bet­ter than the same time last year.

Trade data re­leased ear­lier showed ex­port growth ac­cel­er­ated in May and June, at least tem­po­rar­ily avert­ing con­cern about pos­si­ble po­lit­i­cally dan­ger­ous job losses in trade-re­lated in­dus­tries that em­ploy mil­lions of peo­ple.

In­vest­ment rose by 8.6 per cent in the first half of the year, but that was down from 0.6 per cent from the first quar­ter’s ex­pan­sion.

Pri­vate sec­tor an­a­lysts cite surg­ing debt as the big­gest po­ten­tial risk to China’s longterm eco­nomic sta­bil­ity.

China has re­lied on in­fu­sions of credit to prop up eco­nomic growth since the 2008 cri­sis. To­tal non­govern­ment debt rose from the equiv­a­lent of 170 per cent of an­nual eco­nomic out­put in 2007 to an es­ti­mated 260 per cent last year, un­usu­ally high for a de­vel­op­ing coun­try.

The Moody’s rat­ing agency cut Bei­jing’s credit rat­ing May 25 and the IMF urged Bei­jing on June 14 to get debt un­der con­trol.

Reg­u­la­tors have cited re­duc­ing risk in China’s fi­nan­cial sys­tem as a pri­or­ity this year. Banks have been told to look closely at bor­row­ers, es­pe­cially those try­ing to make ac­qui­si­tions abroad, to en­sure they can man­age their debts.

AP PHOTO/ANDY WONG

Peo­ple spend time at a cafe with its win­dows re­flect­ing a fash­ion ad­ver­tise­ment bill­board at a shop­ping mall in Bei­jing, Mon­day. China’s eco­nomic growth held steady in the lat­est quar­ter, boosted by un­ex­pect­edly strong trade and con­sumer spend­ing, de­spite fears tighter lend­ing con­trols aimed at cool­ing a surge in debt are weigh­ing on com­mer­cial ac­tiv­ity.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.