China's GDP expands 6.9% in first quarter

A steel plant in Hebei. China's first-quarter expansion was the fastest since the third quarter of 2015, with March data showing factory output and exports, among others, grew faster than expected.
A steel plant in Hebei. China's first-quarter expansion was the fastest since the third quarter of 2015, with March data showing factory output and exports, among others, grew faster than expected.PHOTO: AGENCE FRANCE-PRESSE

Faster-than-expected growth supported by infrastructure spending, hot property market

BEIJING • China's economy grew 6.9 per cent in the first quarter from a year earlier, slightly faster than expected, supported by a government infrastructure spending spree and a frenzied housing market that is showing signs of overheating.

First-quarter expansion was the fastest since the third quarter of 2015, with March data showing investment, retail sales, factory output and exports all grew faster than expected.

The strong reading should help underpin wobbly global financial markets but adds to worries that the Chinese government is still relying too heavily on stimulus and "old economy" growth drivers and is not doing enough to tackle risks from an explosive build-up in debt.

Fixed-asset investment excluding rural areas expanded 9.2 per cent for the first three months, accelerating from 8.1 per cent growth last year. Retail sales increased 10.9 per cent from a year earlier in March, while industrial output rose 7.6 per cent last month from a year earlier, compared with an estimated 6.3 per cent rise.

"For the first time in recent years, China starts a year with a strong headline GDP," said Mr Raymond Yeung, chief Greater China economist at Australia & New Zealand Banking Group in Hong Kong. "Thanks to strong investment and property, the economy is performing well."

The government is aiming for growth of around 6.5 per cent in 2017, slightly lower than last year's target of 6.5 to 7 per cent and the actual 6.7 per cent, which was the weakest pace in 26 years.

  • 10.9%
     

    Increase in retail sales last month from a year earlier.

    7.6%
     

    Rise in industrial output last month from a year earlier.

While China's data has been largely upbeat so far this year, many analysts widely expect the world's second-largest economy to lose steam later in the year as the impact of earlier stimulus measures starts to fade and as the local authorities resort to ever-tougher measures in a bid to get soaring home prices under control.

Beijing also is continuing to rely heavily on new credit to generate growth as productivity slows, despite worries about debt risks.

China's banks extended the third highest volume of loans on record in the first quarter, though March lending was less than expected.

At the same time, China's central bank has shifted to a tightening bias, and is using more targeted measures to contain risks in the financial system, after years of ultra- loose settings.

It has raised short-term interest rates several times already this year, and further modest hikes are expected as it tries to coax debt- laden companies to reduce leverage.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on April 18, 2017, with the headline 'China's GDP expands 6.9% in first quarter'. Print Edition | Subscribe