Best of the Week
Most Popular
1. Five Charts That Show We Are on the Brink of an Unthinkable Financial Crisis- John_Mauldin
2.Bitcoin Parabolic Mania - Zeal_LLC
3.Bitcoin Doesn’t Exist – 2 - Raul_I_Meijer
4.Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - Nadeem_Walayat
5.Labour Sheffield City Council Election Panic Could Prompt Suspension of Tree Felling's Private Security - N_Walayat
6.War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat Part2 - Stewart_Dougherty
7.How High Will Gold Go? - Harry_Dent
8.Bitcoin Doesn’t Exist – Forks and Mad Max - Raul_I_Meijer
9.UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - GoldCore
10.New EU Rules For Cross-Border Cash, Gold Bullion Movements - GoldCore
Last 7 days
Government Shutdown Ends – Markets Ignore Looming Debt and Bond Market Threat - 23rd Jan 18
Stock Risks to Watch: Choose Your Bear Market Dashboard - 23rd Jan 18
Worse than Watergate - Release the Memo - Investigate Uranium One - 23rd Jan 18
CAT Stock Bouncing after JPM Upgrade How High and How Long Can This CAT Jump? - 23rd Jan 18
Why Banks Will Be Slammed In The Next Crisis—And That May Be Good News - 23rd Jan 18
Medicare Premiums Are A Shared Pool - Coming Changes That Will Transform Retirement - 23rd Jan 18
Charged Atmosphere of Heavy Police and Security Presence at Sheffield Street Tree Felling Protests - 23rd Jan 18
Pension Crisis And Deficit of £2.6 Billion At Carillion To Impact UK - 22nd Jan 18
Two Factors for Gold That You Don’t Want to Miss - 22nd Jan 18
Why You Must Own Silver in 2018 - 22nd Jan 18
This Could Be The Hottest Mining Stock Of 2018 - 22nd Jan 18
Stock Index Trend Trade Setups for the SP500 & NASDAQ - 22nd Jan 18
Stock Market Deceleration / Distribution - 22nd Jan 18
US Markets vs Govt Shutdown: Stock Markets at all time highs - 22nd Jan 18
Land Rover Discovery Sport - 1 Month Driving Test Review - 22nd Jan 18
Why should you use high-quality YouTube to mp3 converter? - 22nd Jan 18
Silver As Strategic Metal: Why Its Price Will Soar - 21st Jan 18
Stocks, Gold and Interest Rates Three Amigos Ride On - 21st Jan 18
Why Sometimes, "Beating the S&P 500" Isn't Good Enough - 21st Jan 18
Bunnies and Geckos of Sheffield Street Tree Fellings Protests Explained - 21st Jan 18
Jim Rickards: Next Financial Panic Will Be the Biggest of All, with Only One Place to Turn… - 20th Jan 18
Macro Trend Changes for Gold in 2018 and Beyond - Empire Club of Canada - 20th Jan 18
Top 5 Trader Information Sources for Timely, Successful Investing - 20th Jan 18
Bond Market Bear Creating Gold Bull Market - 19th Jan 18
Gold Stocks GDX $25 Breakout on Earnings - 19th Jan 18
SPX is Higher But No Breakout - 19th Jan 18
Game Changer for Bitcoin - 19th Jan 18
Upside Risk for Gold in 2018 - 19th Jan 18
Money Minute - A 60-second snapshot of the UK Economy - 19th Jan 18
Discovery Sport Real MPG Fuel Economy Vs Land Rover 53.3 MPG Sales Pitch - 19th Jan 18
For Americans Buying Gold and Silver: Still a Big U.S. Pricing Advantage - 19th Jan 18
5 Maps And Charts That Predict Geopolitical Trends In 2018 - 19th Jan 18
North Korean Quagmire: Part 2. Bombing, Nuclear Threats, and Resolution - 19th Jan 18
Complete Guide On Forex Trading Market - 19th Jan 18
Bitcoin Crash Sees Flight To Physical Gold Coins and Bars - 18th Jan 18
The Interest Rates Are What Matter In This Market - 18th Jan 18
Crude Oil Sweat, Blood and Tears - 18th Jan 18
Land Rover Discovery Sport - Week 3 HSE Black Test Review - 18th Jan 18
The North Korea Quagmire: Part 1, A Contest of Colonialism and Communism - 18th Jan 18
Understand Currency Trade and Make Plenty of Money - 18th Jan 18
Bitcoin Price Crash Below $10,000. What's Next? We have answers… - 18th Jan 18
How to Trade Gold During Second Half of January, Daily Cycle Prediction - 18th Jan 18
More U.S. States Are Knocking Down Gold & Silver Barriers - 18th Jan 18
5 Economic Predictions for 2018 - 18th Jan 18
Land Rover Discovery Sport - What You Need to Know Before Buying - Owning Week 2 - 17th Jan 18
Bitcoin and Stock Prices, Both Symptoms of Speculative Extremes! - 17th Jan 18
So That’s What Stock Market Volatility Looks Like - 17th Jan 18
Tips On Choosing the Right Forex Dealer - 17th Jan 18
Crude Oil is Starting 2018 Strong but there's Undeniable Risk to the Downside - 16th Jan 18
SPX, NDX, INDU and RUT Stock Indices all at Resistance Levels - 16th Jan 18
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver” - 16th Jan 18
Carillion Bankruptcy and the PFI Sector Spiraling Costs Crisis, Amey, G4S, Balfour Beatty, Serco.... - 16th Jan 18
Artificial Intelligence - Extermination of Humanity - 16th Jan 18
Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities - 15th Jan 18
What Really Happens in Iran?  - 15th Jan 18
Stock Market Near an Intermediate Top? - 15th Jan 18
The Key Economic Indicator You Should Watch in 2018 - 15th Jan 18
London Property Market Crash Looms As Prices Drop To 2 1/2 Year Low - 15th Jan 18
Some Fascinating Stock Market Fibonacci Relationships... - 15th Jan 18

Market Oracle FREE Newsletter

6 Critical Money Making Rules

The Real Story of China’s Strong First-Quarter Growth

Economics / China Economy Apr 20, 2017 - 03:26 PM GMT

By: Dan_Steinbock

Economics After the solid first quarter performance, the central government may be in the unique position to achieve its growth target -  even while tightening.

In the first quarter, China’s economy grew 6.9 percent; slightly faster than expected and led by strong expansion at factories. What the first quarter data reflects is solid growth in several fronts.


Retail sales soared to 10.9 percent on year-to-year basis, which reflects steady progression in the ongoing rebalancing of the Chinese economy toward consumption. Clearly, it was driven by recent gains in wage and credit growth, despite declining subsidies on car demand.

At the same time, industrial production climbed to 7.6 percent on an annual basis, which was supported by government infrastructure investment, including state-owned enterprises (SOE) and property markets. Overall growth increased to 6.9 percent, which was fueled by trade and financing.

Such data herald strong beginning of the year for China, but also a positive contribution to regional growth and, due to the mainland’s role as the second-largest economy in the world, to global growth prospects.

The question is, can this growth performance be sustained in the coming months?

Conditions for sustained growth

In the first quarter, growth was fueled by heavy use of steel in the construction sector, while investment in electronics factories rose as demand strengthened in foreign markets. The former suggests slow progress in efforts to reign in excess capacity in mining output, including steel. That is likely to be noted in friction about steel overcapacity in the forthcoming G20 Summit in Hamburg, Germany.

Domestically, efforts to resolve the steel crisis are likely to strengthen with political consolidation after the 19th National Congress of the Communist Party in the fall.

In turn, the recovery of the foreign markets reflects more positive international prospects. According to the International Monetary Fund (IMF), the world economy is gaining momentum. Yet, such prospects could be undermined by a broad array of forces, including renewed “America First” protectionism, post-elections turmoil in Europe, geopolitical friction, refugee crises, and broad-scale terrorism.

Also, while government spending on infrastructure and the hot property market helped to lift growth in the first quarter, the role of infrastructure investment, including SOE and property markets, is paving way for greater tightening in the near future.

Last month, prices accelerated again in the sizzling property market shaking off the impact of recent cooling measures. In the near-term, more tightening measures are likely as price momentum builds, although peaking price gains and sales in top-tier cities suggest that future curbs may be more targeted.

President Xi Jinping has called on officials to deepen reform of SOEs. The objective is not an overnight liberalization. In the 1990s, Western "shock therapy" advisers promoted the rapid privatization of state-owned companies. The net effect was an economic disaster. Instead, Chinese success is based on gradualism and incremental change, which allowed the share of SOEs in industrial output to decline dramatically from 75 percent in the late 1970s to 25 percent. After the Party Summit in the fall, pragmatic SOE reforms are likely to accelerate as well.

Growth despite tightening

In the coming months, Chinese growth prospects will be fueled by strengthening fundamentals domestically and internationally. Yet, the People’s Bank of China (PBOC) must remain vigilant, due to the risk of inflation. As leading indicators, particularly the producer price index (PPI), are expected to rise, and as inflation tends to emulate the PPI over time, the PBOC’s tighter stance is warranted, even if food prices have remained under control for now.

Internationally, Chinese economy must cope with likely adverse implications from the US Federal Reserve’s expected two more rate hikes, which will contribute to new growth challenges around the world, particularly in the emerging and developing economies.

Furthermore, while the first Trump-Xi Summit managed to contain many potentially adverse prospects - including new trade protectionism, currency friction and regional geopolitical tensions - all of these forces could be re-ignited by potential deterioration of bilateral ties.

In 2016, China’s actual growth was 6.7 percent. The current target for 2017 is “around 6.5 percent.” What the strong first quarter performance does make possible is a more decisive shift to fiscal and monetary tightening in the second half of the year, while keeping the current growth target intact.

That’s the real achievement of the Chinese economy in the first quarter.

Dr Steinbock is the founder of the Difference Group and has served as the research director at the India, China, and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more information, see http://www.differencegroup.net/

© 2017 Copyright Dan Steinbock - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules