Manufacturing and retail recovery drove China's solid Q1 growth

Chinese employees working on an energy-saving bulb production line at a lighting factory in Suining, south-west China's Sichuan province, on Feb 28, 2017.
Chinese employees working on an energy-saving bulb production line at a lighting factory in Suining, south-west China's Sichuan province, on Feb 28, 2017.PHOTO: AFP

BEIJING (REUTERS) - A recovery in China's industrial sector, which accounts for about one-third of the economy, drove China's better-than-expected first quarter economic growth as export orders picked up and steel output hit a record.

Data on Tuesday (April 18) from the National Bureau of Statistics showed the industrial sector grew 6.5 per cent in the first quarter from a year earlier, its fastest pace since the fourth quarter of 2014.

On Monday, China reported first quarter growth of 6.9 per cent, the quickest in six quarters.

Within the industrial sector, manufacturing grew 7.0 per cent compared with the first quarter last year.

Analysts credited growth in exports, in contrast to a contraction in the first three months of 2016, for providing the pick-up in the first quarter.

"It looks to us like the acceleration in 1Q 2017 GDP growth came from electronics exports complementing the 4Q 2016 growth drivers, housing and infrastructure investment," Tim Condon, head of Asia research at ING, said in a note.

The other bright spot was the retail and wholesale sector, which also expanded at the fastest pace since the end of 2014. In January-March, the annual growth pace was 7.4 per cent, compared with 5.8 per cent a year earlier, data showed.

However, growth in the construction industry slowed to 5.3 per cent from 5.9 per cent at the end of last year and has decelerated for four straight quarters, despite rising investment in infrastructure and the real estate industry.

The property sector grew 7.8 per cent in the first quarter, up from 7.7 per cent at the end of 2016, while growth in the finance industry rose to 4.4 per cent from 3.8 per cent.

NBS data showed housing starts picked up in March, growing nearly as fast as sales, which could be a warning sign for overheating in the sector, said Rosealea Yao at Gavekal Dragonomics in Beijing.

"Construction growth is in double digits again, which is not consistent with underlying trends as housing demand has peaked," said Yao.