China’s economy shows more signs of strengthening as industrial output picks up, investment holds steady
But rebound may not be sustainable due to its reliance on government spending, analyst warns
More official figures released on Tuesday suggest that China economy is picking up steam.
Monthly data for last month recorded slightly higher industrial output, an increase in household spending and stable fixed-asset investment.
Economic performance last month was aided by a sizzling housing market. Residential property sales surged 25.6 per cent by floor area in the first eight months from a year earlier.
The stronger-than-expected numbers released by the National Bureau of Statistics on Tuesday, together with a big improvement in last month’s imports data, suggest that Beijing’s pro-growth measures, including increased government spending over recent months, are working.
A stronger economy will make it easier for the central government to take painful restructuring measures and help it cope with global headwinds.
These include a possible interest-rate increase by the US Federal Reserve later this year, and Britain’s decision to leave the European Union.
“The economy shows a full-bodied recovery … and the degree of recovery is better than estimated,” said Liao Qun, chief economist at China Citic Bank International.
Fixed-asset investment expanded 8.1 per cent from the start of January to the end of August, the same rate as in the first seven months. Growth in industrial output quickened to 6.3 per cent last month from 6 per cent in July, the statistics agency said.
The downward pressure on China’s growth should diminish, Louis Kuijs, head of Asia markets at Oxford Economics, wrote in a research note.
“While further stimulus remains necessary to reach the government’s growth target of at least 6.5 per cent in gross domestic product this year, the outlook has improved slightly after the August data,” he said.
Meanwhile, the central bank has refrained from cutting benchmark interest rates or loosening restrictions on bank reserves.
Lu Zhengwei, chief economist at Industrial Bank in Shanghai, said the August rebound might be short lived, as the effects of government-led spending on the economy could wane.
“What’s of concern is the sustainability of the economic rebound. If you rely on investment to boost growth, it will be problematic,” he said.