China Economy Update - Gov.uk
April 2017
China Economy Update SUMMARY
China Economics Network
▪ Chinese official data for the first quarter of 2017 suggests steady growth and broad improvement in the economy boosted by a record surge in lending;
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▪ Industrial production, investment, and trade recovered, while the housing market continued to hold up despite tightening measures; ▪ The IMF revised up its forecast of China’s economic growth for 2017, but again warned on rising debt.
A “cyclical improvement” in indicators across the board at the start of 2017
Sam Mackay First Secretary British Embassy Beijing [email protected]
2. The services sector grew7.7 per cent, still outpacing the heavy industry (which grew at 6.4 per cent) though the gap narrowed slightly.
1. Official data shows China’s economic growth increased to 6.9 per cent in the first quarter of 2017 from 6.7 per cent in 2016 and 6.8 per cent in the previous quarter, slightly higher than most had forecasted and the first consecutive quarterly increases in seven years (Figure 1). The government, however, described it as a cyclical improvement and urge against systematic financial risks.
Industrial production accelerated 3. In the first quarter, industrial production grew 6.8 per cent, the fastest quarterly growth since 2015.
Retail sales remained robust 4. After falling to single digit in February for the first time in 14 years, retail sales resumed growth of 10.9 per cent in March, and 10.0 per cent the first quarter, showing consumption remained robust. Retail sales in rural areas expanded 11.9 percent during the period, outpacing urban areas, where retail sales climbed 9.7 percent year on year. Online sales continued rapid growth, surging 32.1 percent in the first two months.
Figure 1: Quarterly GDP Growth (% change on year before)
%
Nicole Liu Senior Economic Advisor British Embassy Beijing [email protected]
13.0 12.0 11.0
10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0
Business confidence remains positive
National GDP
Services
Manufacturing and heavy industry
Q1/2017
Q4/2016
Q3/2016
Q2/2016
Q1/2016
Q4/2015
Q3/2015
Q2/2015
Q1/2015
Q4/2014
Q3/2014
Q2/2014
Q1/2014
Q4/2013
Q3/2013
Q2/2013
Q1/2013
Q4/2012
Q3/2012
Q2/2012
Q1/2012
Q4/2011
Q3/2011
Q2/2011
Q1/2011
Q4/2010
Q3/2010
Q2/2010
Q1/2010
2.0
5. The official manufacturing PMI climbed to 51.8 in March, a record high previous since May 2012, from To view editions, 51.3 in January and 51.6visit: in February. please https://
Agriculture
1
China Economy Update – March 2017 6. The official non-manufacturing PMI also rose from 54.5 in December to 55.1 in March, the highest reading since July 2014.
% 30
Figure 3: Investment (year to date, % on year before)
25
Imports and exports recovered
20 15
7. In the first quarter, China’s international trade in goods, in USD terms, continued to rebound that imports soared 24.0 per cent, compared with 2.7 per cent growth in the previous quarter, and exports grew 8.2 per cent, leaving trade surplus down to USD65.6 billion. (Figure 2). Note: January and February trade figures can be distorted by the Lunar Chinese New Year Holiday. Figure 2: China Quarterly Growth of Trade in Goods (yoy) 25.0% Net Export (right axis)
Export
10 5 0
FAI
200.0 150.0
10.0%
100.0
5.0%
50.0
0.0%
0.0
-5.0%
-50.0
-10.0%
-100.0
-15.0%
-150.0
-20.0%
-200.0
-25.0%
-250.0
Infrastructure FAI
10. In the first quarter of 2017, China’s total social financing, a broad measure of credit that includes bank lending and non-bank financing, hit a record of RMB6.9 trillion (over US$1 trillion), up by 3.4 per cent over the same period last year.
US$ bn 250.0
15.0%
Manufacturing FAI
Record lending
Import
20.0%
Real Estate FAI
11. Meanwhile, growth of new bank lending moderated by 3.5 per cent from the first quarter of 2016, accounting for 65 per cent of total social financing, down from 70 per cent in the same period of 2016, a signal of government policy tilting towards more tightening, also indicating non-bank financing, including shadow banking, rebounded in the first quarter of 2017.
Investment picked up, supported by infrastructure, manufacturing and real estate
Short term growth outlook improves, but risks mounting
8. Investment growth accelerated to 9.2 per cent in the first quarter of 2017 from 8.1 per cent in 2016, boosted by surge in infrastructure, recovery of manufacturing and continued growth of real estate investment despite tightening measures. (Figure 3)
12. Governor Zhou Xiaochuan of China’s central bank said at the recent G20 meetings that the annual 6.5 per cent growth target is within reach. 13. Along with other international institutions, the IMF upgraded its forecast for China’s economic growth in 2017 to 6.6 percent, 0.1 percentage points higher than its forecast in January, citing sustained momentum from late last year, government-backed investment and rapid credit expansion. But it warned of China’s reliance on debts — funded through an “increasingly opaque and complex financial system”.
9. Infrastructure investment grew 23.5 per cent in the first quarter, up from 17.7 per cent in 2016, pushed by massive front-loaded local publicprivate-partnership (PPP) projects in January and February. However, the momentum has slowed from 27.3 per cent in the first month - a signal of sustainability of infrastructure investment being questionable.
2
China Economy Update SUMMARY
China Economics Network
▪ Chinese official data for the first quarter of 2017 suggests steady growth and broad improvement in the economy boosted by a record surge in lending;
For comments, suggestions, questions, please contact us:
▪ Industrial production, investment, and trade recovered, while the housing market continued to hold up despite tightening measures; ▪ The IMF revised up its forecast of China’s economic growth for 2017, but again warned on rising debt.
A “cyclical improvement” in indicators across the board at the start of 2017
Sam Mackay First Secretary British Embassy Beijing [email protected]
2. The services sector grew7.7 per cent, still outpacing the heavy industry (which grew at 6.4 per cent) though the gap narrowed slightly.
1. Official data shows China’s economic growth increased to 6.9 per cent in the first quarter of 2017 from 6.7 per cent in 2016 and 6.8 per cent in the previous quarter, slightly higher than most had forecasted and the first consecutive quarterly increases in seven years (Figure 1). The government, however, described it as a cyclical improvement and urge against systematic financial risks.
Industrial production accelerated 3. In the first quarter, industrial production grew 6.8 per cent, the fastest quarterly growth since 2015.
Retail sales remained robust 4. After falling to single digit in February for the first time in 14 years, retail sales resumed growth of 10.9 per cent in March, and 10.0 per cent the first quarter, showing consumption remained robust. Retail sales in rural areas expanded 11.9 percent during the period, outpacing urban areas, where retail sales climbed 9.7 percent year on year. Online sales continued rapid growth, surging 32.1 percent in the first two months.
Figure 1: Quarterly GDP Growth (% change on year before)
%
Nicole Liu Senior Economic Advisor British Embassy Beijing [email protected]
13.0 12.0 11.0
10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0
Business confidence remains positive
National GDP
Services
Manufacturing and heavy industry
Q1/2017
Q4/2016
Q3/2016
Q2/2016
Q1/2016
Q4/2015
Q3/2015
Q2/2015
Q1/2015
Q4/2014
Q3/2014
Q2/2014
Q1/2014
Q4/2013
Q3/2013
Q2/2013
Q1/2013
Q4/2012
Q3/2012
Q2/2012
Q1/2012
Q4/2011
Q3/2011
Q2/2011
Q1/2011
Q4/2010
Q3/2010
Q2/2010
Q1/2010
2.0
5. The official manufacturing PMI climbed to 51.8 in March, a record high previous since May 2012, from To view editions, 51.3 in January and 51.6visit: in February. please https://
Agriculture
1
China Economy Update – March 2017 6. The official non-manufacturing PMI also rose from 54.5 in December to 55.1 in March, the highest reading since July 2014.
% 30
Figure 3: Investment (year to date, % on year before)
25
Imports and exports recovered
20 15
7. In the first quarter, China’s international trade in goods, in USD terms, continued to rebound that imports soared 24.0 per cent, compared with 2.7 per cent growth in the previous quarter, and exports grew 8.2 per cent, leaving trade surplus down to USD65.6 billion. (Figure 2). Note: January and February trade figures can be distorted by the Lunar Chinese New Year Holiday. Figure 2: China Quarterly Growth of Trade in Goods (yoy) 25.0% Net Export (right axis)
Export
10 5 0
FAI
200.0 150.0
10.0%
100.0
5.0%
50.0
0.0%
0.0
-5.0%
-50.0
-10.0%
-100.0
-15.0%
-150.0
-20.0%
-200.0
-25.0%
-250.0
Infrastructure FAI
10. In the first quarter of 2017, China’s total social financing, a broad measure of credit that includes bank lending and non-bank financing, hit a record of RMB6.9 trillion (over US$1 trillion), up by 3.4 per cent over the same period last year.
US$ bn 250.0
15.0%
Manufacturing FAI
Record lending
Import
20.0%
Real Estate FAI
11. Meanwhile, growth of new bank lending moderated by 3.5 per cent from the first quarter of 2016, accounting for 65 per cent of total social financing, down from 70 per cent in the same period of 2016, a signal of government policy tilting towards more tightening, also indicating non-bank financing, including shadow banking, rebounded in the first quarter of 2017.
Investment picked up, supported by infrastructure, manufacturing and real estate
Short term growth outlook improves, but risks mounting
8. Investment growth accelerated to 9.2 per cent in the first quarter of 2017 from 8.1 per cent in 2016, boosted by surge in infrastructure, recovery of manufacturing and continued growth of real estate investment despite tightening measures. (Figure 3)
12. Governor Zhou Xiaochuan of China’s central bank said at the recent G20 meetings that the annual 6.5 per cent growth target is within reach. 13. Along with other international institutions, the IMF upgraded its forecast for China’s economic growth in 2017 to 6.6 percent, 0.1 percentage points higher than its forecast in January, citing sustained momentum from late last year, government-backed investment and rapid credit expansion. But it warned of China’s reliance on debts — funded through an “increasingly opaque and complex financial system”.
9. Infrastructure investment grew 23.5 per cent in the first quarter, up from 17.7 per cent in 2016, pushed by massive front-loaded local publicprivate-partnership (PPP) projects in January and February. However, the momentum has slowed from 27.3 per cent in the first month - a signal of sustainability of infrastructure investment being questionable.
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