China starts 2017 with strong economic data and thick smog

A group of indicators measuring Chinese economic activities, the first available gauges of the US$10 trillion economy in 2017, showed expanding manufacturing and services, marking the comeback of a polluting way of growth as evidenced by a thick smog blanketing nearly half of the country.

While China is certain to achieve its minimum 6.5 per cent economic growth target for 2016, few analysts are celebrating in light of the appalling air pollution – some of the worst ever – and a long list of economic challenges ahead for 2017, from reducing debt and excessive capacity at home to managing a delicate trade relations with the US.

“If China really decides to expand overcapacity curbs to other sectors other than coal and steel, industrial added-value output will be affected,” said Liu Xuezhi, an analyst with the Bank of Communications.

To make matters worse, China’s trade “may deteriorate” after Donald Trump is sworn in as US president, while the European Union may also become more hostile to Chinese products this year, Liu said.

The EU and US, China’s top two export destinations, have already launched investigations into what they say is dumping of products from solar to steel.