Date
21 January 2017
High-rise residential flats take shape in Shenzhen. Housing demand helped boost China's growth in the first quarter but not enough to meet expectations. Photo: Reuters
High-rise residential flats take shape in Shenzhen. Housing demand helped boost China's growth in the first quarter but not enough to meet expectations. Photo: Reuters

China growth riding on property as first quarter expansion slows

China’s economy could face stronger headwinds if its debt-fueled property growth proves unsustainable, economists say.

The economy grew just 1.1 percent in the first quarter from the previous three months, the slowest quarterly growth since 2011, Bloomberg reports, citing the National Bureau of Statistics.

Housing demand helped boost growth, with output of real-estate services adding 9.1 percent from a year earlier while construction rose 7.8 percent, NBS said.

Saturday’s reports take some of the shine off Friday’s data showing 6.7 percent growth from a year earlier and better-than-forecast strength in March across a range of indicators.

While surging home sales and property investment have supported expansion, economists said it remains to be seen whether debt-aided growth can hold up, and more stimulus maybe needed to sustain the 6.5 percent to 7 percent government growth target.

“Growth is still under pressure and the economy remains fundamentally weak,” said Zhou Hao, an economist at Commerzbank A.G. in Singapore.

“China will continue the easing measures” by cutting the main interest rate and required-reserve ratios for big banks.

The 1.1 percent quarter-on-quarter expansion fell short of the 1.5 percent rate forecast by economists surveyed by Bloomberg.

Year-on-year growth of 6.7 percent announced Friday matched forecasts for the slowest quarterly expansion since the first quarter of 2009.

central bank governor Zhou Xiaochuan, who has cut the main rate six times since late 2014 to a record low and reduced bank reserve ratios, said the economy had a good start to the year and the fundamentals will remain sound in the long run.

He said China will pursue prudent monetary policy in a flexible and moderate way while keeping reasonable and ample liquidity.

The yuan has “remained basically stable against a basket” of currencies, Zhou, in Washington for the World Bank-International Monetary Fund meetings, said in a statement to the IMF’s steering committee.

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