Out with the slug­gish­ness

In­ter­na­tional Mon­e­tary Fund raises its fore­cast for China’s growth next year from 6.3% to 6.5%, re­ports.

China Daily (Canada) - - ANALYSIS -

Has China’s econ­omy fi­nally turned the cor­ner? Although first quar­ter GDP growth fig­ure of 6.7 per­cent pub­lished on April 15 was the slow­est since the fi­nan­cial cri­sis, most of the re­cent eco­nomic data now points to the econ­omy sta­bi­liz­ing.

Growth was boosted by a re­vival in the hous­ing mar­ket with prop­erty in­vest­ment ris­ing by 6.2 per­cent, its fastest pace for a year, and by a 10.7 cent in­crease in fixed-as­set in­vest­ment, mainly on in­fras­truc­ture projects.

There is also ev­i­dence the econ­omy is con­tin­u­ing to re­struc­ture away from man­u­fac­tur­ing and tra­di­tional in­dus­tries, with ser­vices grow­ing at 7.6 per­cent —ac­count­ing for 56.9 per­cent of to­tal GDP growth.

The econ­omy also gen­er­ated 3.18 mil­lion jobs in the first quar­ter, just un­der a third (31.8 per­cent) of the govern­ment’s tar­get for the whole year.

Most of the in­di­ca­tors pointed to China shak­ing off some of the slug­gish­ness that was par­tic­u­larly ev­i­dent in the sec­ond half of last year.

The In­ter­na­tional Mon­e­tary Fund im­me­di­ately raised its fore­cast for China’s growth this year from 6.3 to 6.5 per­cent in line with the govern­ment’s of­fi­cial fore­cast of be­tween 6.5 and 7 per­cent.

The GDP fig­ures were pub­lished only two days af­ter the an­nounce­ment of a surge in China’s trade per­for­mance, with ex­ports in­creas­ing 18.7 per­cent in March, af­ter fall­ing in Jan­uary and Fe­bru­ary, and im­ports fall­ing just 1.7 per­cent, com­pared with an 8 per­cent fall the pre­vi­ous month.

Sheng Laiyun, a spokesman for the Na­tional Bureau of Statis­tics, said the first-quar­ter per­for­mance sug­gested a new mo­men­tum for the econ­omy.

“We have no rea­son not to con­clude that the Chi­nese econ­omy has had a good start (to the year),” he said.

Louis Kuijs, head of Asia eco­nom­ics at Ox­ford Eco­nom­ics, be­lieves there are fi­nally grounds for op­ti­mism

“There is some life in the econ­omy that there wasn’t a few months ago, es­pe­cially in the phys­i­cal sphere with the pickup in real es­tate and even in heavy in­dus­try with more steel be­ing re­quired for the ex­tra con­struc­tion,” he said.

One of the ques­tions that re­mained was how much the im­proved per­for­mance was down to credit ex­pan­sion.

To­tal so­cial fi­nanc­ing, which in­cludes bank lend­ing, lo­cal govern­ment bonds (and also swap­ping debt for bonds) as well as shadow bank­ing, rose 6.59 tril­lion yuan ($1.02 tril­lion) in the first quar­ter, said the Peo­ple’s Bank of China.

While this was a clear demon­stra­tion of the govern­ment’s com­mit­ment to boost the econ­omy, there were also con­cerns that the re­sul­tant fil­lip to growth might only serve to fur­ther stoke up debt in the longer term.

We have no rea­son not to con­clude that the Chi­nese econ­omy has had a good start (to the year).” spokesman for the Na­tional Bureau of Statis­tics


A worker sorts out boxes in a de­liv­ery com­pany in Chang­sha, Hu­nan prov­ince. The ser­vices sec­tor con­trib­uted much more than in­dus­try to the GDP growth.

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