China’s economic growth accelerated for the second straight quarter, beating expectations as a robust performance by the nation’s manufacturers weighed in behind the frothy real estate sector and massive government infrastructure spending.
Growth in the secondary sector of the economy — manufacturing and core productive industries — accelerated from the final quarter of 2016 to 6.4%, the fastest clip in nine quarters. As reported earlier, state-owned enterprises has been a key driver behind the latest recovery.
The surprisingly strong GDP confirms a slew of recent data showing China’s economic recovery moving onto a broader footing as producer prices pick up, manufacturing recovers and consumer spending is on the rise.
March industrial output accelerated to 7.6%, the fastest pace in four years and in flat contrast to expectations for no change at 6.3%.
Growth in services — which includes the much-watched residential real estate development — slowed to 7.7% from 8.3% in the three months ended December. The agriculture and mining-based primary sector expanded at 3.0%, marginally better than the previous reading of 2.9%.
“For the first time in … recent years, China starts a year with a strong headline GDP,” ANZ Banking Group’s chief China economist, Raymond Yeung, told Bloomberg. “Thanks to strong investment and property, the economy is performing well.”
Fixed-asset investment expanded 9.2% as of March 31, compared with 8.1% growth for all of 2016. However, investment in infrastructure jumped 23.5%. While that marks a slight slowdown from February’s 27.3%, it remains the fastest pace of growth in at least three years. The government this month announced plans to build a new city — Xiongan New Area — that may become the nation’s biggest ever infrastructure project.
Investment in property development rose 9.1% in the quarter, from 8.9% in the first two months and 6.9% in 2016. A combination of more land and housing supplies and a more forceful crackdown on speculative binge of apartment units across the most popular cities may put the market back in balance over the longer run, but for the time being, demand dominates.
There are some signs the government may be finding traction with its efforts to pour iced water on the most overheated parts of the property market: growth in both sales and investment appears to have moderated in the red-hot eastern seaboard; in China’s western and central regions, activity has surged.