China Economy Update - Gov.uk
May 2017
China Economy Update SUMMARY
China Economics Network For comments, suggestions, questions, please contact us:
▪ Chinese official data shows economic indicators broadly moderated in April; ▪ Growth of industrial production, investment, and retail sales slowed slightly; ▪ Monetary tightening intensified and housing sales continued to cool down, dampening near-term economic growth.
Economic activity softened in April
Nicole Liu Senior Economic Advisor British Embassy Beijing [email protected] Sam Mackay First Secretary British Embassy Beijing [email protected]
cent year on year, compared to 5.8 in quarter one. (Figure 1)
1. Official data shows China’s economy cooled a little in April following an unexpectedly strong first quarter. Most analysts think China’s economic growth peaked in the first quarter (at least for this year).
% 30
Figure1 : Investment (year to date, % on year before)
25
2. Growth in value-added of industrial output, a rough proxy for economic growth, fell from 7.6 per cent year on year in March to 6.5 per cent in April, lower than many analysts had predicted.
20 15 10 5 0
3. China’s official manufacturing PMI eased, falling from 51.8 in March to 51.2 in April, across most components, including new orders, output, new export orders, and employment. Caixin’s unofficial manufacturing PMI, which covers mainly small and medium sized companies, also dipped to 50.3 in April from 51.2 in March.
FAI
Real Estate FAI
Manufacturing FAI
Infrastructure FAI
5. Private
investment growth slowed after accelerating for six consecutive months, falling to 6.9 per cent in year to date April from 7.7 per cent in the first quarter. (Figure 2)
Investment weakened 4. Fixed asset investment growth dropped back to
To viewinvestment previous editions, 6. Although infrastructure held up and please visit: https:// growth of investment in real estate hit a 26month high in April, analysts see the slowdown in manufacturing and private investment indicating the stable economic growth in the
8.9 per cent in January to April period after hitting 9.2 per cent in the first quarter, with manufacturing investment expanding 4.9 per
1
China Economy Update – May 2017 first quarter is vulnerable. Front-loaded infrastructure investment is seen as unsustainable, while housing investment is likely to cool down as tightening measures levels up.
9. Within TSF, bank lending in RMB fell slightly to RMB1.0 trillion in April from RMB1.2 trillion in March. However, non-bank financing dropped to RMB342 billion in April from RMB949 billion in March, reflecting the government’s crackdown on the shadow banking sector.
Exports and imports slowed
Figure 2: Investment (year to date, % on year before)
%
10. China’s goods exports in USD terms grew 8.0 per cent year on year in April, slowing from 16.4 per cent in March. Growth of imports also slowed markedly to 11.9 per cent in USD terms, compared to 20.4 per cent in March.
30 25 20 15 10 5
11. However, the latest trade deal between China and the Unites States suggests trade tensions between the world’s two largest economies are reduced, for now.
0
FAI
State Sector FAI
Private FAI
Retail sales stable 12. Growth of retail sales fell slightly to 10.7 per cent in April from 10.9 per cent in March.
7. Within this, there is significant variation in investment across industries. Growth is strongest in high-tech and new growing sectors (environment protection, health care and entertainment) and weakest in overcapacity industries (mining and steel), with infrastructure, real estate and auto in between.
13. But housing sales, in value (up 20.1 per cent) and volume (up 15.7 per cent), slowed markedly in the first four months by 5 and 3.8 percentage points, respectively, compared to the first quarter. This is a result of a nationwide tightening, which is likely to further drag on housing related sales, such as home appliances, furniture and renovation services.
Aggregate lending declined on shrinking non-bank financing 8. In April, China’s Total Social Financing (TSF), a broad measure of credit and liquidity in the economy, fell to RMB1.4 trillion from RMB2.1 trillion in March. (Figure 3)
Growth impetus fades tightening continues
policy
14. The moderation in growth in April is in line with many analysts’ view that China’s growth peaked in the first quarter.
Figure 3: Total Social Financing
RMB Billion 4,000
while
15. The government continues to tighten controls over housing prices and measures to prevent financial risks.
3,500 3,000 2,500 2,000
16. However, in a year of great political importance to the leading Party, to what extent the policy makers would allow the economy to slow before they have to loosen up control is unclear.
1,500 1,000 500 0 -500
TSF
Bank lending
Non-bank financing
2
China Economy Update SUMMARY
China Economics Network For comments, suggestions, questions, please contact us:
▪ Chinese official data shows economic indicators broadly moderated in April; ▪ Growth of industrial production, investment, and retail sales slowed slightly; ▪ Monetary tightening intensified and housing sales continued to cool down, dampening near-term economic growth.
Economic activity softened in April
Nicole Liu Senior Economic Advisor British Embassy Beijing [email protected] Sam Mackay First Secretary British Embassy Beijing [email protected]
cent year on year, compared to 5.8 in quarter one. (Figure 1)
1. Official data shows China’s economy cooled a little in April following an unexpectedly strong first quarter. Most analysts think China’s economic growth peaked in the first quarter (at least for this year).
% 30
Figure1 : Investment (year to date, % on year before)
25
2. Growth in value-added of industrial output, a rough proxy for economic growth, fell from 7.6 per cent year on year in March to 6.5 per cent in April, lower than many analysts had predicted.
20 15 10 5 0
3. China’s official manufacturing PMI eased, falling from 51.8 in March to 51.2 in April, across most components, including new orders, output, new export orders, and employment. Caixin’s unofficial manufacturing PMI, which covers mainly small and medium sized companies, also dipped to 50.3 in April from 51.2 in March.
FAI
Real Estate FAI
Manufacturing FAI
Infrastructure FAI
5. Private
investment growth slowed after accelerating for six consecutive months, falling to 6.9 per cent in year to date April from 7.7 per cent in the first quarter. (Figure 2)
Investment weakened 4. Fixed asset investment growth dropped back to
To viewinvestment previous editions, 6. Although infrastructure held up and please visit: https:// growth of investment in real estate hit a 26month high in April, analysts see the slowdown in manufacturing and private investment indicating the stable economic growth in the
8.9 per cent in January to April period after hitting 9.2 per cent in the first quarter, with manufacturing investment expanding 4.9 per
1
China Economy Update – May 2017 first quarter is vulnerable. Front-loaded infrastructure investment is seen as unsustainable, while housing investment is likely to cool down as tightening measures levels up.
9. Within TSF, bank lending in RMB fell slightly to RMB1.0 trillion in April from RMB1.2 trillion in March. However, non-bank financing dropped to RMB342 billion in April from RMB949 billion in March, reflecting the government’s crackdown on the shadow banking sector.
Exports and imports slowed
Figure 2: Investment (year to date, % on year before)
%
10. China’s goods exports in USD terms grew 8.0 per cent year on year in April, slowing from 16.4 per cent in March. Growth of imports also slowed markedly to 11.9 per cent in USD terms, compared to 20.4 per cent in March.
30 25 20 15 10 5
11. However, the latest trade deal between China and the Unites States suggests trade tensions between the world’s two largest economies are reduced, for now.
0
FAI
State Sector FAI
Private FAI
Retail sales stable 12. Growth of retail sales fell slightly to 10.7 per cent in April from 10.9 per cent in March.
7. Within this, there is significant variation in investment across industries. Growth is strongest in high-tech and new growing sectors (environment protection, health care and entertainment) and weakest in overcapacity industries (mining and steel), with infrastructure, real estate and auto in between.
13. But housing sales, in value (up 20.1 per cent) and volume (up 15.7 per cent), slowed markedly in the first four months by 5 and 3.8 percentage points, respectively, compared to the first quarter. This is a result of a nationwide tightening, which is likely to further drag on housing related sales, such as home appliances, furniture and renovation services.
Aggregate lending declined on shrinking non-bank financing 8. In April, China’s Total Social Financing (TSF), a broad measure of credit and liquidity in the economy, fell to RMB1.4 trillion from RMB2.1 trillion in March. (Figure 3)
Growth impetus fades tightening continues
policy
14. The moderation in growth in April is in line with many analysts’ view that China’s growth peaked in the first quarter.
Figure 3: Total Social Financing
RMB Billion 4,000
while
15. The government continues to tighten controls over housing prices and measures to prevent financial risks.
3,500 3,000 2,500 2,000
16. However, in a year of great political importance to the leading Party, to what extent the policy makers would allow the economy to slow before they have to loosen up control is unclear.
1,500 1,000 500 0 -500
TSF
Bank lending
Non-bank financing
2
