Economists caution that headline growth may have hit the peak for this year.
China’s economy appears to be firing on all cylinders, with growth in the first quarter accelerating to its fastest pace in a year and a half. Industrial production, investment and retail sales all came in better than market expectations. The 6.9% growth rate set in the first three months of the year was largely fueled by government-led infrastructure spending and a property boom. Economists caution that headline growth may have hit the peak for this year and that the momentum is likely to fade as Beijing moves to deflate housing bubbles and curb financial risks. Following are excerpts from economists’ views on the economic data, edited for length and style:
China’s economic growth came in better than expected, but we believe the overall growth trajectory will moderate over the next few quarters. The mix of the growth profile is a little bit interesting: Investment has accelerated due to the delayed effect of the property boom, while consumption unexpectedly slowed owing to sluggish automobile sales. We think that investment will unlikely remain elevated for long as property prices have peaked and credit growth is expected to slow down in the second half of this year. Zhou Hao, Commerzbank AG
The higher-than-expected economic growth in the first quarter was boosted by a robust real-estate market and reflation of industrial products. But such growth momentum is hard to maintain in the second quarter as Beijing moves to deflate property bubbles. I think the GDP figure in the first quarter would be the peak for the year. Home sales are expected to slow in coming months and property prices may see a nationwide decline in the latter half of the year as effect of the control measures kicks in. Larry Hu, Macquarie Research
China’s first-quarter GDP growth rate may be the peak for this year at 6.9%, but the country’s growth outlook has improved all the same due to easing trade tensions with the U.S. Overall, a growth target of 6.5% for this year won’t be a problem. The biggest concern about the economy is rising financial risk, such as in the shadow banking sector, as regulators try to reduce corporate debt ratios. Jianguang Shen, Mizuho
The past few months have seen the Chinese economy returning to the investment-driven growth model. Although the industry breakdown of GDP will only be available tomorrow, construction and property transactions are expected to be strong. The Chinese government has a tendency to rely on infrastructure development to sustain growth in the long term … (read more)
Compiled by Grace Zhu