China’s economy is heading for a year of rising economic growth for the first time in seven years as exports and the property sector do better than expected.
Data out yesterday suggests that growth for the year could end up around 6.9% after second quarter growth (the second in a row) at that rate.
Economist say the country is on track for its first year of rising growth since 2010.
Growth last year was 6.7% and the official target announced last March for 2017 was around 6.5%.
We can credit unexpected strength in the real estate market which has kept growth humming now for the past year (see separate story) and solid industrial production for the quarter, especially in the month of June. As well the trade account also provided an unexpected boost to the manufacturing sector. After contracting 7.7% last year, exports rebounded by 8.5% in the first half of 2017, reflecting strong demand from the US and Europe.
Gross domestic product (GDP) grew 1.7% quarter-on-quarter in the une quarter from the 1.3% rate in the first three months of this year, China’s National Bureau of Statistics said on Monday.
The usual monthly data showed a jump in retail sales to an annual rate of 11% in the six months to June from 10.7% in the five months to May.
Industrial production rose 7.6% in June, up sharply from 6.5% in May, while fixed asset investment rose 8.6%, steady on the rate for May.
Following the strong start to this year in Q1, many analysts had predicted China’s growth would slow markedly, as the government tightened monetary policy and the property market lost momentum. The slowdown came has been milder than expected so far.
The June property price data for China’s 70 major cities will be out tomorrow.
Indeed several government linked economic research institutes had suggested growth would come in at 6.8% in the June quarter thanks to the impact of the crack down on debt.
But that didn’t happen, however the risks to the wider economy from rising debt and overcapacity in large swathes of the manufacturing aren’t going away anytime soon.
Many worry that the property market is in a bubble, particularly in the biggest cities.
And President Xi Jinping told state owned businesses at the weekend they would have cut debt (https://www.ft.com/content/5a15ac98-69d5-11e7-bfeb-33fe0c5b7eaa?mhq5j=e1).
The Financial Times reported that the President though “stopped short of announcing the creation of a new financial super-regulator to rein in mounting risks in the sector, as some had expected.”
“Deleveraging at SOEs is of the utmost importance,” the Chinese president said at this weekend’s National Financial Work Conference, which convenes only once every five years. He added that the country’s financial officials must also “get a grip” on so-called “zombie” enterprises kept alive by infusions of cheap credit.”
Cuts to excess capacity in steel and coal mining have already seen million of tonnes of output dropped and several million jobs lost.
