2017: China’s GDP Growth Accelerates and Beats Target

China’s economic growth accelerated in 2017 for the 1st time in 7 years as exports, constructions, and consumer spending strongly grew, beating the government’s target.

The world’s 2nd largest economy expanded in the last 3 months of 2017, delivering overall growth for the year to 6.9%, up from 6.7% in 2016, the National Bureau of Statistics said.

Quarterly figures showed gross domestic product (GDP) gained 6.8% in the October-December period from a year earlier, beating a 6.7% forecast by analysts.

On a seasonally adjusted basis, the economy grew 1.6% from the previous quarter, expanding at a slightly slower pace than the 1.7% increase in the 3rd quarter, according to the closest measure of the economy’s most recent performance.

Investment by private firms boosted 6% in the January-December period, up from 5.7% growth in January to November, suggesting that the private sector outlook may be improving.

Retail sales climbed 10.2% in 2017, while exports soared 10.8% from a year earlier, despite increased trade tensions during US President Donald Trump’s 1st year in office.

“The national economy has maintained the momentum of stable and sound development and exceeded expectations,” said the NBS in a report.

Louis Kuijs of Oxford Economics said that continued strong demand should help support China’s exports. “While domestic demand should cool on tighter financial policy, China’s policymakers want the slowdown in credit and the economy to be gradual. We project GDP growth to slow to 6.4% this year,” he said.

The official figures and signs of property market resilience support economist views that fundamentals would remain intact in 2018. However, some headwinds may be along the way from tighter regulations, US trade protectionism, and a softer consumer sector.

“China’s growth is very healthy,” said Iris Pang, a Hong Kong-based Greater China economist at ING. “The risks that we worried about 2017, for example overcapacity cuts having a negative impact on GDP, did not happen because new sectors are actually coming out to help production to grow.”

The Chinese economy is going through a phase of “creative destruction” as lively new economy sectors like e-commerce and online financial services coexist with still-dominant old economy sectors, said Chi Lo, economist at BNP Paribas Investment Partners for Greater China.

However, growth in the old economy still outpaces the new economy, so “when you mix the 2 together, there is an inherent drag on growth,” Chi said. “The power of creation is not yet strong enough to overwhelm the power of destruction in the economy, but the transition is structurally positive,” he added.

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