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China Economy

China economy picks up steam on sizzling housing market

PUBLISHED : Tuesday, 14 March, 2017, 11:31am
UPDATED : Tuesday, 14 March, 2017, 11:02pm

A slew of economic data released by China’s state statistics agency on Tuesday pointed to strong momentum in the world’s second biggest economy in the first two months of 2017, blessed by a 25 per surge in property sales by floor area from a year earlier.

Despite Beijing’s repeated efforts to curb housing price rises in major cities and a huge stockpile of unsold apartments in small towns, China’s property investment in the first two months rose 8.9 per cent from a year earlier, the National Bureau of Statistics said on Tuesday. Sales of commercial property jumped 26 per cent by value.

The red-hot property sector was the “biggest surprise” for the Chinese economy in early 2017, Larry Hu, head of China economics at Macquarie Securities in Hong Kong, wrote in a research note.

Two key indicators point to growing stability in China’s economy

China’s industrial output in January and February rose 6.3 per cent compared with the same period a year ago and fixed-asset investment strengthened to 8.9 per cent in the first two months, both proving stronger than analysts expected.

The latest data, together with a three-month high in manufacturing activity in February and a four per cent increase in exports in the first two months of 2017, confirm signs of stabilisation compared with the second half of last year and eased worries that China’s growth may soon lose steam.

The numbers will offer fresh evidence to Premier Li Keqiang, who will take questions from journalists on Wednesday, to show that China is on track to achieve its full-year growth target for 2017, which is set at “about 6.5 per cent, and higher if possible”.

“From what we can tell based on the first two months, the Chinese authorities are able to pursue the five key tasks without having a major negative effective on growth at least at this point,” said ING chief Asia economist Tim Condon.

China may drop stimulus measures as economy gathers steam, say analysts

The key tasks outlined by the government are reducing production capacity in some industries, cutting stock levels, reducing debt, cost reductions and the improvement of economically underdeveloped areas.

“The policy is a little more balanced between stimulus and cleaning up… They seemed determined to press ahead with calibrated deleveraging and reducing risks of bubbles in the financial system,” said Condon.

Ding Shuang, chief Greater China economist at Standard Chartered, said current economic growth was generally in a comfortable zone for the government to carry out its policy priorities such as cutting debt, but he warned the economy still faced problems.

“The growth of actual investment should be lower considering the strong rise of the producer price index and there are signs of a relatively weak domestic demand,” he said.

Retail sales growth fell to an 11-year low of 9.5 per cent in the first two months, with car sales down by 1 per cent.

Despite the recovery of the US economy driving up the exports of major Asian economies, including China, Ding said the threat of US actions against Chinese products would eventually come. “It is just a matter of time,” he said.

Julian Evans-Pritchard, a China economist at Capital Economics, wrote in a research note that China’s economic strength remains heavily reliant on rapid investment.

“The investment growth will be difficult to sustain given clear signals that the fiscal and monetary policy stance will be less supportive this year,” he said.