BEIJING (Reuters) – China's economy grew at a slightly faster-than-expected pace of 6.8 percent in the first quarter, driven by strong consumer demand, healthy exports and strong real estate investment .
Resilience in the second largest economy in the world It will probably help to maintain a synchronized global recovery in Continue for a while longer, even as China faces growing commercial tensions with the United States that could affect billions of dollars in business.
But economists still expect China to lose momentum in the coming quarters, as Beijing forces local governments to reduce their infrastructure projects to contain their debt and property sales are further cooled by strict government controls about purchases to combat speculation.
Consumption, which accounted for almost 80 percent of economic growth in the first quarter, played an important role in supporting the economy, even when the risks grew for Chinese exporters.
March retail sales increased 10.1 percent from the previous year, slightly more than expected and the strongest pace in four months, with consumers buying more than just about everything from cosmetics to furniture and appliances.
"Retail sales data tells you a lot about consumption, it's not seasonal: if you look at the growth in cosmetics, clothes spending, car spending, there has been a persistent trend for a few months," Iris said. Pang, China economist at ING in Hong Kong.
"Consumption is really strong, there is strong wage growth in urban areas, we underestimate the power of consumption in China."
The growth of gross domestic product (GDP) in the first quarter was also supported by solid exports, with shipments to the US. UU., Which increased 14.8 percent year-on-year. Some analysts have speculated about the possibility that Chinese companies have sent their deliveries to the US. UU As the tariff threats loomed.
"We do not expect (tensions between the US and China) will evolve into a large-scale trade war, but we also argue that this uncertainty will not disappear and we expect a bumpy road of negotiations." In terms of the impact of potential tariffs It is quite limited, particularly this year, "said Haibin Zhu, chief China economist at JP Morgan in Hong Kong.
"Even in the worst situation in which both countries begin to implement tariffs of $ 50 billion, we are talking about a few tenths of a percentage point and it is likely that it will only begin to affect the economy at the end of this year and in 2019. "
GROWS ON FINANCIAL RISKS, POLLUTION TO CONTINUE
Analysts polled by Reuters expected the January-March GDP to grow 6.7 percent from the previous year, decelerating marginally from 6.8 percent in the two previous quarters but remaining remarkably stable for such a large and dynamic economy.
On a quarterly basis, GDP grew by 1.4 percent, slightly less than expected and decreased by 1.6 percent in October-December.
Growth has remained comfortably above the government's target of around 6.5 percent for the full year, giving policymakers room to further reduce risks in China's financial system and control pollution without stagnate economic growth.
The authorities have repeatedly committed to reducing a mountain of corporate debt in the name of national security, although they have moved cautiously to avoid the delay in commercial activity.
Beijing has also remained faithful to its campaign for the shuttering of highly polluting factories as it seeks to encourage more sustainable and higher quality growth from sectors such as technology.
Chimney industries have been a key focus of that pivot in industrial policy, although it weighs on China's overall manufacturing prospects.
Industrial production expanded 6.0 percent in March in the year, the slowest pace in seven months. Analysts had predicted that production growth would cool to 6.2 percent from 7.2 percent in the first two months of the year.
"Below the steady growth of GDP there is a fairly rapid rebalancing between industrial sectors, investment sectors and old sectors of consumption, services and new economy such as technology," said Robert Subbaraman, chief economist for Asia, excluding Japan. in Nomura in Singapore.
"The most opportune data for March, however, point to incipient signs of a slowdown in growth underway, led by these old sectors of the economy."
SLOW REAL ESTATE
First-trimester readings on China's real estate sector, a key economic driver, mixed but also seemed to reflect the growing influence of changing government policies.
Real estate investment accelerated to 10.4 percent in the quarter, the fastest pace in three years, compared with an increase of 9.9 percent in the first two months of this year.
Analysts say that a significant increase in land prices, as well as a government push to build more public housing, could have contributed to the unexpected strength in the main figure and a start in construction.
Property sales, however, continued to decelerate amid a flurry of government measures to control rising housing prices. Sales by floor area increased by 3.6 percent in the quarter, decreasing since the beginning of the year.
Investment in fixed assets has also faltered, as Beijing urges local governments to refrain from rampant loans to finance glamorous projects to exceed economic growth targets.
The growth of investment in fixed assets between January and March fell to 7.5 percent, below expectations and 7.9 percent in January-February.
Investment in infrastructure increased 13 percent year on year, decreasing slightly from January to February.
Investment in fixed assets of the private sector increased 8.9 percent in January-March, accelerating from an increase of 8.1 percent in the first two months. Private investment accounts for approximately 60 percent of total investment in China.
"The rally in private investment this year is mainly due to the improvement in corporate profits last year and the support of government policy," said David Qu, economist at the beginning of the year. of ANZ in Shanghai.
Despite a more optimistic first quarter than expected, analysts still predict that China's economic growth will fall to 6.5 percent this year, with ongoing regulatory crackdowns and the US trade dispute. UU As a key risk, it showed a Reuters poll.
To see a graph of China's GDP trends, click here
To see a graph of trends in China's economic indicators, click here
Elias Glenn Reports; Additional reports by Yawen Chen and Stella Qiu in Beijing and Marius Zaharia in HONG KONG; Written by Ryan Woo; Edition of Kim Coghill