Sino FileCan China ever exorcise its phantom growth numbers?
Policymakers may see good signs in a better-than-expected first quarter, but Beijing is still tipping the scales in ways that will come back to haunt it in the long term
China’s better-than-expected economic growth in the first quarter could serve as both as positive indicator and a worrying sign for the world’s second-largest economy, depending on your perspective.
The 6.9 per cent annual pace of expansion in the January-March period has surpassed a 6.8 per cent pace of growth in the last quarter of 2016 and a 6.7 per cent increase for the whole year. This may be good news for policymakers as it sets a solid foundation for meeting their official growth target of “around 6.5 per cent” for this year.
But the uptick headlines have also triggered worry over Beijing’s overreliance on traditional pump-priming stimulus and old growth drivers to achieve short-term results for political objectives, as leaders jockey for position ahead a crucial leadership transition at a party conclave in the autumn.
The first back-to-back quarterly acceleration in seven years does not yet suggest a turnaround in a persistent slowdown, but rather a one-off rebound buoyed by government-led spending on infrastructure, supported by robust credit growth and further strengthening of property markets.
Fixed-asset investment (FAI) in the quarter expanded by 9.2 per cent, accelerating from 8.1 per cent growth last year, of which growth of FAI by state-owned enterprises rose 13.6 per cent. Spending by the central and local governments rose 21 per cent year on year in the quarter. In particular, government spending on infrastructure jumped 23.5 per cent in the period.
