Optimists vindicated: China is ticking along nicely

The panic over Chinese growth appears to have been overdone as the country's construction sector forges ahead.

790-China-634

China is still building

Last summer and early this year markets were panicking about a steep downturn in China. The worry always looked overdone, and the latest data bear out the optimists' view, as Roger Bootle and Julian Evans-Pritchard of Capital Economics point out. The official figures say annual GDP growth slowed to 6.7% in the first three months of 2016, from 6.8% in the previous quarter.

Nobody pays much attention to the state's data, of course, but an alternative gauge developed by Capital Economics suggest that the economy is growing by around 4%, while the direction of travel is encouraging. After a sharp slowdown in early 2015, the economy is stabilising and appears to be gathering steam. "This would not be surprising, given stimulatory monetary and fiscal policy," says Bootle. There have been several interest-rate cuts over the past fewmonths, while lending restrictions have been loosened.

"The turnaround has been built on the back of stronger activity in construction and real estate", underpinned by state stimuli, notes Evans-Pritchard. Growth in new housing starts has accelerated; fixed asset investment strengthened during the first quarter. Industrial production growth jumped to a nine-month high of 6.8% year-on-year in the first quarter. Growth in electricity and cement output reached the fastest pace in over a year.

Retail sales growth edged up, thanks to the strong labour market. There should be more to come, as credit growth has reached a 20-month high. There are plenty of potential problems to keep investors awake at night, but a slump in China isn't one of them.

Recommended

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
Hong Kong’s brain drain
Chinese economy

Hong Kong’s brain drain

A change in the political atmosphere and a harsh zero-Covid regime has seen thousands flee the global financial hub. Does it have a future – or will S…
14 May 2022
Interest-rate rises mean more pain for stocks
Stockmarkets

Interest-rate rises mean more pain for stocks

Interest rates are rising around the world as central banks try to get inflation under control. That’s hitting stockmarkets – and there is more pain t…
13 May 2022
The return of the Marcos dynasty to the Philippines
Emerging markets

The return of the Marcos dynasty to the Philippines

The Philippines has elected Bongbong Marcos as president, three decades after his family was ousted from power in a popular revolution. What does that…
12 May 2022

Most Popular

High inflation will fade – here’s why
Inflation

High inflation will fade – here’s why

Many people expect high inflation to persist for a long time. But that might not be true, says Max King. Inflation may fall faster than expected – and…
13 May 2022
Cryptocurrencies are crashing – so how low will bitcoin go?
Bitcoin & crypto

Cryptocurrencies are crashing – so how low will bitcoin go?

The entire cryptocurrency sector is crashing, with bitcoin now well below $30,000. This is big, says Dominic Frisby. So just how low could bitcoin go?
12 May 2022
What the Ukraine crisis might mean for ESG investing
Advertisement Feature

What the Ukraine crisis might mean for ESG investing

The Ukraine crisis has brought many of the issues around ESG investing into sharper focus. Where does the sector go from here?
3 May 2022