BEIJING: China has issued a raft of upbeat data showing the
economy got off to a strong start to 2017, supported by strong bank lending, a
government infrastructure spree and a much-needed resurgence in private
investment.
Solid growth is welcome news for China’s policymakers as
they turn their focus to containing risks from a sharp build-up in debt ahead
of a major leadership reshuffle later this year.
But economists are not sure how long the pace can be
sustained as the central bank takes a tighter stance on credit and exporters
brace for a surge in US protectionism.
Fixed-asset investment expanded more strongly than expected
in the first two months of the year as growth in private investment more than
doubled from 2016, while surging demand for steel for new roads, bridges and
homes lifted factory output.
That added to readings last week showing robust imports,
particularly of commodities such as iron ore, and a sharp rise in producer
prices which is boosting industrial profits.
“Today’s (yesterday’s) data appeared to be mainly driven by
infrastructure spending and a rebound in the real estate sector,” said Zhou
Hao, a Singapore-based economist at Commerzbank.
China has cut its growth target to around 6.5% this year to
give policymakers more room to push through painful reforms to reduce financial
risks created by years of debt-fuelled stimulus. The world’s second-largest
economy grew 6.7% last year, the slowest pace in 26 years.
China’s first-quarter economic growth could accelerate to 7%
year-on-year, from 6.8% in the last quarter, economists at OCBC wrote in a note
last week.
But OCBC and many other China watchers expect that pace will
begin to slow starting in spring as the payoff from last year’s stimulus spree
begins to fade.
“This strength remains heavily reliant on rapid investment
growth that will be difficult to sustain given clear signals that the fiscal
and monetary policy stance will be less supportive this year,” said Julian
Evans-Pritchard, a Singapore-based China Economist at Capital Economics.
China’s new loans fell sharply in February from near-record
levels the previous month but were still higher than expected.
ANZ said the rapid credit expansion might trigger further
hikes in short-term interest rates, following two early this year, as policymakers
remain concerned about high leverage in the economy.
Analysts singled out an unexpectedly strong rebound in
investment as particularly encouraging for China’s outlook.
Fixed-asset investment growth accelerated to 8.9% in January
and February from the same period last year, largely due to strong property and
infrastructure construction.
Economists had expected investment growth of 8.2%,
quickening from 8.1% in the whole of 2016.
Growth in private investment quickened to 6.7%, more than
twice the pace of last year, suggesting private firms are growing more
optimistic about the business outlook.
Sheng Laiyun, a spokesperson for the statistics bureau,
attributed the rebound largely to better implementation of Public-Private
Partnership (PPP) projects, which the government has been pushing to attract
more private capital into traditionally state-dominated areas.