China's economy excels beyond expectations


17 Jul, 2017

China's economy excels beyond expectations

China's GDP growth of 6.9% between April and June surpassed the Government's expectations, as the country's property market continues to excel but fears grow over a housing bubble in larger cities that could burst.

Last year saw China's economy grow at its slowest rate in 26 years. However, the latest data released on Monday added to the picture of rebounding growth for the Chinese economy in 2017.

The growth rate in the second quarter was identical to first quarter of this year, with the Government on track for its first year-on-year acceleration since 2010.

Property was vital to China's growth in the first quarter. The sector continued to perform well throughout the second quarter, however, there are growing concerns that the market is in a bubble, particularly in larger cities such as Beijing and Shanghai.

To prevent an oversaturated market within large cities, Beijing has been trying to rein in debt and implement tougher measures on the property sector and lenders. In fact, many analysts expected China's economy to slow as those policies kicked in.

However, despite efforts, property investment grew by 8.5% in the first half of the year whilst overall growth is well above Beijing’s 6.5% target for 2017.

"Property prices will have an impact in the second half, but the impact might not be as big as we thought. It is only on prime cities. The third-tier and fourth-tier cities might catch up a little bit and that will offset some of the slowdown in first tier cities," said Iris Pang, Greater China Economist with ING.

Elsewhere, senior international economist at PNC Bank, Bill Adams wrote the following on Monday;

"As China goes, so go emerging markets. Its solid growth reinforces recoveries for commodity exporters and keeps 2017’s pick-up in global growth on track".

He added: "The retreat of US long-term interest rates since early 2017 and the Fed's commitment to a gradual pace of interest rate hikes are maintaining supportive monetary conditions for emerging market growth".

However, in the medium term, risks from rising debt and overcapacity in large swaths of the manufacturing sector still loom over the economy.

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