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17 July 2017
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| China's economic growth (The Total Investment & Insurance Solutions) |
China's economic growth held steady in the latest quarter, boosted by
unexpectedly strong trade and consumer spending, despite fears tighter lending
controls aimed at cooling a surge in debt are weighing on commercial activity. The Total Investment & Insurance
Solutions
Output rose 6.9 percent in the three months
ending in June from a year ago, data showed Monday. That was in line with the
previous quarter and better than many forecasts.
Communist leaders are eager to keep growth
steady as they head into a ruling party congress at which President Xi Jinping
is due to be reappointed as leader later this year. But the economy faces
headwinds as Beijing clamps down on lending to rein in a surge in debt that has
fueled fears it might harm the financial system or drag on growth.
Forecasters expect the economy to cool as
those controls depress investment, the biggest component of growth in recent
years. The Total Investment &
Insurance Solutions
"The economy appears to have ended Q2 on
a strong note," said Julian Evans-Pritchard of Capital Economics in a
report. The Total Investment &
Insurance Solutions
"This strength seems unlikely to last,
however," he wrote. "The recent crackdown on financial risks has
driven a slowdown in credit growth, which will weigh on the economy during the
second half of this year."
The International Monetary Fund has forecast
China's full-year growth for 2017 to hold steady at last year's level of 6.7
percent. The IMF raised its outlook twice this year, citing strong government
spending.
The government's growth target is 6.5 percent
"or higher if possible."
Consumer spending and trade growth both
accelerated during the second quarter, helping to offset softening investment
in factories, real estate and other fixed assets.
Retail sales rose 10.4 percent in the first
half of the year, up 0.1 percentage points from the first quarter's rate,
according to the National Bureau of Statistics. Factory output rose 6.9 percent
in the first half, up 0.1 percentage points from the first quarter rate and 0.9
percentage points better than the same time last year. The Total Investment & Insurance Solutions
Trade data released earlier showed export
growth accelerated in May and June, at least temporarily averting concern about
possible politically dangerous job losses in trade-related industries that
employ millions of people. The Total
Investment & Insurance Solutions
Investment rose by 8.6 percent in the first
half of the year, but that was down from 0.6 percent from the first quarter's
expansion. The Total Investment &
Insurance Solutions
Private sector analysts cite surging debt as
the biggest potential risk to China's long-term economic stability. The Total Investment & Insurance
Solutions
China has relied on infusions of credit to
prop up economic growth since the 2008 crisis. Total nongovernment debt rose
from the equivalent of 170 percent of annual economic output in 2007 to an
estimated 260 percent last year, unusually high for a developing country.
The Moody's rating agency cut Beijing's
credit rating May 25 and the IMF urged Beijing on June 14 to get debt under
control. The Total Investment &
Insurance Solutions
Regulators have cited reducing risk in
China's financial system as a priority this year. Banks have been told to look
closely at borrowers, especially those trying to make acquisitions abroad, to
ensure they can manage their debts. The
Total Investment & Insurance Solutions
The country's top economic official, Premier
Li Keqiang, tried to quell fears with a speech last month at the World Economic
Forum in the northeastern city of Dalian. Li said financial risks are
"generally under control" and Beijing can achieve this year's
development targets.
At a weekend meeting of the Chinese
leadership on financial strategy, Xi called for the state-dominated financial
system to "prevent and contain financial risk." He called for
financial services to "go back to the origin" and focus on "serving
the real economy" instead of supporting speculation.
Analysts said that is likely to lead to
creation of new regulatory structures, though a report issued following the
meeting called for "appropriate sequencing," suggesting Beijing might
move more slowly than some reform advocates want. The Total Investment & Insurance Solutions
"We do not foresee major opening
moves" on easing controls on China's currency or allowing money to move
into and out of the economy more easily, said UBS economist Tao Wang in a
report.The Total Investment &
Insurance Solutions
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