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Home / Business / China's first-quarter economic growth exceeded expectations for corporate consumption, the real estate sector

China's first-quarter economic growth exceeded expectations for corporate consumption, the real estate sector



PEKING (Reuters) – China's economy grew 6.8 percent in the first quarter of 2018, slightly faster than expected, driven by strong consumer demand and surprisingly robust real estate investment despite continued measures to curb rising real estate prices.

Workers help dock a cargo ship at a port in Qingdao, Shandong Province, China April 1
3, 2018. China Daily via REUTERS

Beijing wants to keep the economic balancing act intact, even though it's growing trading tensions Its biggest trading partner , the United States, could affect billions of dollars in cross-border trade.

"Consumption is really strong, there is strong wage growth in urban areas, and we underestimated the power of consumption in China," said Iris Pang, a Chinese economist at ING in Hong Kong

"Real estate investment is actually increasing, therefore, I would not conclude that the real estate segment is derailing the economy, "she added, consensus that the sector is cooling off amid growing mortgage rates and measures to curb speculation.

The analysts surveyed by Reuters had expected gross domestic product (GDP) growth of 6.7 percent in the January-March quarter, which weakened only marginally from 6.8 percent in the previous two quarters.

This is positive news for Beijing, giving policymakers room to further reduce the risks in China's financial system and curb pollution without slowing economic growth.

The resilient consumption, which accounted for 77.8 percent of economic growth in the first quarter, has helped support the world's second largest economy, even as the risks to exporters increase.

Investment in real estate, one of the key economic drivers, accelerated to 10.4 percent in the first quarter, the fastest rise in three years. Compared to 9.9 percent in the first two months of this year and an increase of 9.1 percent in the same period in 2017.

March retail sales rose 10.1 percent over the previous year, the strongest pace in four months, with consumers buying almost everything from cosmetics and clothing to furniture and household appliances. Analysts have expected retail sales to increase 9.9 percent from 9.7 percent in the first two months of the year.

Economic performance in the first quarter has laid a solid foundation for the year as a whole, even as international uncertainty increases and domestic development continues to be uneven, according to the National Statistics Office.

Growth continued to be well above the government's full-year goal of around 6.5 percent, which could give policymakers more confidence to reduce risks in the financial system and reduce the burden on the environment.

Quarter-on-quarter, gross domestic product grew 1.4 percent in the first quarter, after declining 1.6 percent in October / December.

Analysts had expected growth of 1.5 percent.

Overall, fixed assets fell from January to March to 7.5 percent, below expectations and cooled from January to February of 7.9 percent.

Infrastructure investment in the first quarter increased 13 percent year-over-year, but declined slightly from January to February.

Private investment in property, plant and equipment increased 8.9 percent from January to March, compared with an increase of 8.1 percent in the first two months. Private investments account for about 60 percent of total investment in China.

Industrial production was perhaps the biggest surprise when it rose 6.0 percent yoy in March – the slowest pace in seven months.

Analysts predicted that industrial production growth would slow to 7.2 percent from 7.2 percent in the first two months.

Click here for an overview of China's GDP trends

For an overview of the development of Chinese economic indicators, click here

Report by Elias Glenn; Write by Ryan Woo; Arrangement by Kim Coghill


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