China’s GDP grows 6.8% in Q1

Con­sumer de­mand key growth driver


BEI­JING: China’s econ­omy grew at a slightly faster-than-ex­pected pace of 6.8% in the first quar­ter, buoyed by strong con­sumer de­mand and ro­bust prop­erty in­vest­ment.

Re­silience in the world’s sec­ond-largest econ­omy will likely help keep a syn­chro­nised global re­cov­ery on track for a while longer, even as China faces ris­ing trade tensions with the United States that could im­pact bil­lions of dol­lars in busi­ness.

But economists still ex­pect China will lose some 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% 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% 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.

First-quar­ter gross do­mes­tic prod­uct (GDP) growth was also backed by ro­bust ex­ports, with ship­ments to the US jump­ing 14.8% on-year.

An­a­lysts polled by Reuters had ex­pected Jan­uary-March GDP to grow 6.7% from a year ear­lier, slow­ing marginally from 6.8% in the pre­vi­ous two quar­ters but re­main­ing re­mark­ably steady for such a large and dy­namic econ­omy.

On a quar­terly ba­sis, GDP grew 1.4%, slightly less than ex­pected and eas­ing from 1.6% in Oc­to­ber-De­cem­ber.

Growth has re­mained com­fort­ably above the gov­ern­ment’s tar­get of around 6.5% for the full year, giv­ing pol­i­cy­mak­ers room to fur­ther re­duce risks in China’s fi­nan­cial sys­tem and rein in pol­lu­tion with­out stalling eco­nomic growth.

Au­thor­i­ties have re­peated pledged to re­duce a moun­tain of cor­po­rate debt in the name of na­tional se­cu­rity, though they have moved cau­tiously to avoid stunt­ing busi­ness ac­tiv­ity.

Bei­jing has also stuck to its cam­paign of shut­ter­ing heav­ily pol­lut­ing fac­to­ries as it tries to en­cour­age more sus­tain­able and higher qual­ity growth from sec­tors such as tech­nol­ogy.

Smokestack in­dus­tries have been a key fo­cus of that pivot in in­dus­trial pol­icy, even though it is weigh­ing on China’s over­all man­u­fac­tur­ing out­look.

In­dus­trial out­put ex­panded 6.0% in

March on-year, the slow­est pace in seven months. An­a­lysts had pre­dicted out­put growth would cool to 6.2% from 7.2% in the first two months of the year.

“Un­derneath the sta­ble GDP growth is quite rapid re­bal­anc­ing from in­dus­trial, in­vest­ment and old econ­omy sec­tors to con­sump­tion, ser­vices and new econ­omy sec­tors like tech,” said Robert Sub­bara­man, chief econ­o­mist for Asia ex­clud­ing Japan at No­mura in Sin­ga­pore.

“The more timely March data, how­ever, point to nascent signs of a growth slow­down un­der­way, led by these old econ­omy sec­tors.”

First-quar­ter read­ings on China’s prop­erty sec­tor, a key eco­nomic driver, were mixed but also ap­peared to re­flect the grow­ing in­flu­ence of chang­ing gov­ern­ment poli­cies.

Real es­tate in­vest­ment ac­cel­er­ated to 10.4% in the quar­ter — the fastest pace in three years — com­pared with a 9.9% rise in the first two months of this year.

An­a­lysts say a sig­nif­i­cant rise in land prices, as well as a gov­ern­ment push to build more pub­lic hous­ing, could have con­trib­uted to the un­ex­pected strength in the head­line fig­ure and a jump in con­struc­tion starts.

Prop­erty sales, how­ever, con­tin­ued to slow amid a flurry of gov­ern­ment mea­sures to get soar­ing home prices un­der con­trol. Sales by floor area rose 3.6% in the quar­ter, eas­ing from ear­lier in the year.

Fixed-as­set in­vest­ment has also fal­tered as Bei­jing urges lo­cal gov­ern­ments to re­frain from ram­pant bor­row­ing to fi­nance glam­our projects to beat eco­nomic growth tar­gets.

Jan­uary-March fixed-as­set in­vest­ment growth slowed to 7.5%, be­low ex­pec­ta­tions and 7.9% in Jan­uary-Fe­bru­ary.

In­fras­truc­ture i nvest­ment jumped 13% on-year, eas­ing slightly from Jan­uary-Fe­bru­ary.

Pri­vate-sec­tor fixed-as­set in­vest­ment rose 8.9% in Jan­uary-March, ac­cel­er­at­ing from an in­crease of 8.1% in the first two months.

Pri­vate in­vest­ment ac­counts for about 60% of over­all in­vest­ment in China.

De­spite a more up­beat first quar­ter than ex­pected, an­a­lysts still pre­dict China’s eco­nomic growth will slow to 6.5% this year, with the on­go­ing reg­u­la­tory crack­down and US trade dis­pute seen as key risks, a Reuters poll showed.


An em­ployee sorts duck eggs at a fac­tory in Nan­tong, China’s eastern Jiangsu prov­ince. China’s econ­omy grew a fore­cast­beat­ing 6.8% in the first quar­ter, of­fi­cial data showed.

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