China's economy holds momentum as factory output, investment accelerate

New cars in a parking lot in Shenyang, China, on March 6, 2017.
New cars in a parking lot in Shenyang, China, on March 6, 2017.PHOTO: AFP

BEIJING (BLOOMBERG) - China's economy started the year on a firm footing as its old growth engines gathered pace.

Industrial production climbed 6.3 per cent from year earlier in January and February combined, versus median estimate of 6.2 per cent in a Bloomberg economist survey.

Retail sales advanced 9.5 per cent in the first two months, missing economists forecasts, as auto sales dropped after a tax increase on small-engine cars.

Fixed-asset investment increased 8.9 per cent during the same period. Analysts had growth here of 8.2 per cent, quickening from 8.1 per cent in the whole of 2016.

"The data pointed to a good start to the year. Fixed asset investment got a boost largely because of infrastructure projects. It shows that the proactive fiscal policy is playing out well," said Tommy Xie, an economist at OCBC Bank in Singapore. "Infrastructure will be generally strong this year thanks to public-private partnerships. Credit data in February also showed that investment is getting adequate financial support."

"China's economy is opening the year with a good start, although pro-growth policies to shore up consumption in coming months are needed," said Gao Yuwei, a researcher at the Bank of China's Institute of International Finance in Beijing. "Auto sales have slowed to weigh on consumption after two years of splurging."

In a sign that the economy's momentum is building, private fixed-asset investment accelerated to 6.7 per cent growth from a year earlier in the first two months of 2017.