China’s economy has shown signs of renewed strength with better-than-expected annualised fourth quarter GDP growth.
While figures from China’s National Bureau of Statistics (NBS) show the economy grew by 6.7 per cent in 2016, the fourth quarter’s annualised growth ticked up to 6.8 per cent, slightly above consensus estimates.
Despite the better-than-expected end to year – fuelled by a massive wave of government stimulus, debt and low interest rates – it is still the sixth successive year the economy has slowed and the lowest annual GDP growth recorded in 26 years.
However, the annual growth rate is in the middle of the target band set by the National People’s Congress in March last year.
Westpac economist Elliott Clarke said the continued stability in Chinese growth is not surprising given political events this year.
“This is evident in the ongoing improvement in real estate construction and continued strength in key infrastructure spending as well as robust growth in services.”
‘Moderate slowdown’ expected
Other key monthly data released by the NBS at the same time produced mixed results.
Retail sales beat expectations, growing by 10.9 per cent in December, a slight pick-up from the month before.
Industrial production slid from 6.2 per cent growth in November to 6 per cent, while fixed asset investment (FAI) – a proxy for construction and infrastructure spending – also fell.
Bank of America Merrill Lynch economist James Seddon said noted slower FAI growth was mainly driven by tapering project funding support.
“Meanwhile, manufacturing investment picked up in December, likely helped by improving industrial profits and lower real interest rates,” Mr Seddon wrote in note to clients.
“In addition, property investment growth accelerated in December.”
“In the absence of further easing (interest rate cuts), we expect a moderate growth slowdown into the first half of 2017 mainly due to investment growth weakness.”
NAB’s senior Asian economist Gerard Burg argued the comparatively stronger end to year masks deeper worries ahead.
“NAB’s forecasts for Chinese economic growth are unchanged – at 6.5 per cent in 2017 and 6.25 per cent in 2018,” he said.
“We continue to note risks to these forecasts – most recently the uncertainty regarding US trade policy under the Trump administration, the high levels of corporate sector debt and risks of price bubbles in real estate markets.”