China’s economy expanded by 6.7 per cent last year, its slowest rate in 26 years but still within the official target range, driven by an increase in state stimulus, record bank lending and the ongoing strength of the property sector.
The rate of expansion in the world’s second biggest economy to 74.4 trillion yuan (€10.13 trillion) was slightly higher than expected, buoyed by private consumption as the ranks of China’s middle class continue to swell.
While a rapid rise in lending by state-owned backs and the still uncertain impact on the Chinese economy of a Donald Trump US presidency has some analysts worried, there are political reasons why the Chinese economy should continue to notch up significant growth readings this year.
Later this year sees a five-yearly reshuffle at the top of the ruling Communist Party and President Xi Jinping is expected to use more stimulus to keep the economy simmering to ensure political stability.
China’s GDP in 2016 maintained “a medium- and high-speed growth” thanks to government efforts in restructuring the economy, Ning Jizhe, vice-chairman of the national development and reform commission and commissioner of the national bureau of statistics (NBS), told a news conference in Beijing.
Producer price index
Retail sales increased 10.9 per cent from a year earlier in December, their strongest performance in a year, and above a forecast reading of 10.7 per cent, while the producer price index shows China is pulling out of a four-year streak of deflation.
Earlier this week, the International Monetary Fund upgraded its 2017 growth forecast to 6.5 per cent, up 0.3 per cent on October, expecting an increase in government stimulus, but it also warned about rising debt as state-owned banks flood the market with cheap credit.
Guo Lei, senior macroeconomy analyst with GF Securities, wrote in a research note: “The cooling property market will put pressure on the industry sector starting from the second quarter of this year.”
He said an expected decline in car sales of 7-8 per cent this year, due to a cut in incentives, would prove another drag on economic growth in 2017.
Analysts are also waiting to see if Trump follows through on his promises to introduce tough trade measures against China.
Property market
"The stabilisation of the economy was largely due to the rally in the property market, which has also triggered concerns of an asset bubble," Zhou Hao, an economist at Commerzbank in Singapore, wrote in a research paper. "In the coming year, China will put more effort to balance growth, financial risks and external challenges, especially from Trump."
Growth was the lowest since 1990. The government target had been for 6.5-7 per cent growth for 2016, but there have been concerns about the reliability of official data after Chen Qiufa, governor of the rust-belt Liaoning province in the northeast, admitted some local fiscal figures had been falsified between 2011 and 2014.
NBS chief Ning insisted the data were reliable and said any regional officials found to have falsified economic figures would be punished “in accordance with laws and regulations”. – (Additional reporting: Bloomberg)
