Red Dragon grows faster than expected
CHINA’S economy grew at a slightly faster-than-expected pace of 6.8 percent in the first quarter, buoyed by strong consumer demand and robust property investment.
Resilience in the world’s second-largest economy will likely keep a synchronised global recovery on track for a while longer, even as China faces rising tensions with the US that could impact billions of dollars in trade.
But economists still expect China to lose momentum in coming quarters, as Beijing forces local governments to scale back infrastructure projects to contain their debt, and as property sales cool further due to strict government controls on purchases to fight speculation.
Consumption, which accounted for almost 80 percent of economic growth in the first quarter, played a significant role in supporting the economy, even as risks grew for Chinese exporters.
March retail sales rose 10.1 percent from a year earlier, slightly more than expected, and the strongest pace in four months, with consumers buying more of almost everything, from cosmetics to furniture and home appliances.
“The retail sales data tells you a lot about consumption. It is not seasonal – if you look at growth in cosmetics, spending on clothing, spending on cars, there has been a persistent trend for a few months,” said Iris Pang, Greater China economist at ING in Hong Kong.
“Consumption is really strong, there is strong wage growth in urban areas. We underestimated the power of consumption in China.”
China’s export sector also posted solid growth in the first quarter, with shipments to the US jumping 14.8 percent yearon-year. Some analysts have speculated Chinese firms may have rushed out deliveries to the US as tariff threats loomed.
However, net exports overall were a drag on GDP growth in the quarter after giving an added boost to the economy last year, highlighting the need for sustained strength in domestic demand if significant new tariffs are imposed.
“We don’t expect (the USChina) tensions will evolve into a full-scale trade war, but we also argue this uncertainty will not disappear and we expect a bumpy road of negotiations. In terms of the impact of potential tariffs, it is pretty limited, particularly this year,” said Haibin Zhu, chief China economist at JP Morgan in Hong Kong. – Reuters