Slowbutsteady

China’s economy looks poised to maintain medium-tohigh growth

China’s economy grew by 6.7 percent in 2016, a significant decrease compared to 10.6 percent in 2010. However, in the first half of this year, its economic growth has shown signs of rising, hitting 6.9 percent year on year, the same rate as in the first and second quarters, according to figures released by National Bureau of Statistics on July 17. In fact, recent readings from a number of indicators tend to indicate that short-term fluctuations that have occurred as China’s economy bottoms out are coming to an end.

The value added of major industrial enterprises, an important economic indicator, expanded 6.9 percent year on year in the first half, 0.1 percentage point higher than that of the first quarter. The service sector has continued its growth, with the index of services production increasing 8.3 percent year on year. The purchasing managers’ index rose to 51.7 in June, up from 51.2 in May, marking the 11th consecutive month of expansion.

By 2016, the share of China’s residential population living in urban areas had risen to 57.35 percent. Meanwhile, the proportion of urban household registration holders accounted for 41.2 percent of the population. Compared with the residential population, the size of China’s “floating population” is huge, giving strong momentum to urbanization.

In the process of pushing for a new type of urbanization, China will speed up its infrastructure development through urban agglomerations and public service sharing.

The promotion of a new type of urbanization is expected to improve the real estate development environment, and provide continuous support for demand. As a result of improved popularity, the housing market in a number of second-tier cities will benefit from stronger demand. These urban growth poles, in turn, are expected to play a strong radiating role in boosting the development of surrounding third and fourth-tier cities.

In this context, real estate investment has staged a rebound since last year. Investment in real estate development grew 6.9 percent year on year in 2016, which is 5.9 percentage points faster than a year earlier. It grew 8.5 percent in the first half of this year.

Moreover, infrastructure investment is expected to maintain relatively strong growth. The number of construction projects have been on the rise as China promotes new-type urbanization and the Belt and Road Initiative. Besides, some local governments have gained relevant experience in issuing bonds and using public-private partnerships for fundraising.

As a result, infrastructure investment has shifted from a model driven by high growth targets, to a model driven by an increase in construction projects and improved funding.