Domestic Analysts Expect Moderate Easing in Second Quarter Economic Growth

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Some of China’s leading economics analysts forecast a soft easing of economic growth in the second quarter of 2017.

Official figures from China’s National Bureau of Statistics indicates that growth in both real estate investment and infrastructure investment has eased, with nationwide year-on-year real estate investment posting a nominal growth rate of 8.8% for the first five months of the year, for a fall of 0.5 percentage points compared to the January to April period.

Infrastructure investment growth is also easing, with tertiary sector investment (exclusive of power, heating, gas and water production and supply) rising 20.9% YoY during the first five months of the year, for a fall of 2.4 percentage points compared to the figure for the first four months.

China Merchants Bank senior analyst Liu Dongliang said to Caixin that infrastructure investment had primarily been impacted by a slowdown in local investment, which is likely to come under further pressure in future following efforts by the Ministry of Finance to tighten up local government investment.

According to Liu the slew of macroeconomic data for May indicated that the Chinese economy was not as weak as the market had forecast, and would perhaps pass through a “turning point in the classic sense of the term.”

Because any future easing would be moderate, Liu expects the authorities to maintain strong regulation of the financial sector and continue with the ongoing deleveraging program.

Morgan Shidan chief economist Zhang Jun said that the Chinese economy would see a marked easing in growth in the second quarter compared to the first quarter, yet it would be moderate and controllable, and that both manufacturing sector investment and domestic consumption would hold steady.

Caixin Insight chief economist Zhong Zhengsheng said that insufficient removal of excess manufacturing capacity as well as a “robust regulatory” environment was hampering the confidence of private investors, and that the continued heavy reliance of manufacturing investment on exports, as well as end demand which plays a deciding role for the property and infrastructure sector, would make it difficult for these sector to serve as an endogenous force giving counter-cylical support to fixed asset investment.

Consumption has been a bright spot for the Chinese economy, however, with a contribution rate of 77.2% to economic growth in the first quarter. Consumption growth held steady in May, abetting a rise in overall economic stability.

 

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