China economy seen growing 6.8% in Q1

BEIJING (Reuters) – China’s economy, the world’s second largest, will likely expand 6.8 percent in the first quarter of 2017, the official

Xinhua agency quoted a government think tank as saying on Wednesday.

The expected pace is on par with the 6.8-percent growth logged in the fourth quarter, which was better than market expectations due to higher government spending and record bank lending.

The National Academy of Economic Strategy attributed the first-quarter expansion to a strong rise in factory-gate prices, rebounding corporate profits and increasing imports,

Xinhua said. “The focus of macro-economic policies should be in supply-side structural reforms to boost potential output in the long run,” Wang Hongju, a researcher at the academy, was quoted by Xinhua as saying.

In the first half of the year, GDP will grow by 6.7 percent. Industrial production is likely to increase moderately in the second quarter, while investment sees slightly slower growth, according to the think tank.

It warned that the government should guard against risks in the property and financial sectors by properly managing monetary and land supply “floodgates,” Xinhua said.

Meanwhile, activity in China’s vast manufacturing sector likely grew for an eighth straight month in March as a surprise rebound in the property market added to a construction boom, boosting sales of building materials from steel to cement, a Reuters poll showed.

The official manufacturing purchasing managers’ index (PMI) is expected to stay at 51.6 in March, the same as in February which was the second-highest reading since July 2014, according to a median forecast of 31 economists in a Reuters poll.

While that is well above the 50 mark which separates expansion from contraction, over a dozen cities have announced fresh property cooling measures in recent weeks to slow home price rises, raising questions over how long the solid pace of growth can be sustained.

Home sales rebounded in the first two months of the year with an increase in new starts, defying previous government curbs to contain bubbly prices in big cities such as Beijing.