China's Stabilizing Economy Can Thank Policymakers.
BEIJING -- There is no doubt that the world's second-largest economy
is stabilizing -- the most recent data confirms this, but the same data
shows the economy is heavily reliant on government policy.
The data, released by China's National Bureau of Statistics, reflects a resilient economy. Industrial production rose 6.3% during January and February combined, while fixed asset investment surged 8.9%. Growth in both sectors came in higher than market expectations as polled by Thomson Reuters, which foresaw a 6.2% increase in industrial production and an 8.2% lift in fixed asset investment.
The data suggests policymakers are committed to achieving this year's growth target of "around 6.5% or higher," as announced earlier this month by Premier Le Keqiang during the opening session of the National People's Congress. The government has more or less set the target below last year's 6.7% growth as it pushes ahead with difficult economic reforms.
Economists, however, are not so impressed with the numbers. "Ahead of the 19th [Chinese Communist Party] National Congress in the fall," said Toru Nishihama, chief economist at Dai-ichi Life Research Institute, "we all are well convinced that policymakers will achieve economic stabilization no matter what. There is no doubt about this. But we are not convinced that we will see similar growth without policy supports."
The annual session of the National People's Congress has done little to clarify the outlook of China's economy, Nishihama said. "All we heard was a series of empty slogans. There was not a single detail of how to shift from investment-led growth to a consumption-based [economy]."
Julian Evans-Pritchard, an economist at Capital Economics, sees policymakers behind the current growth numbers. The momentum, he noted in a report, "remains heavily reliant on rapid investment growth." He said this "will be difficult to sustain, given clear signals that the fiscal and monetary policy stances will be less supportive this year."
Consumption data, also released on Tuesday, meanwhile, hints at what the economy might look like with less-supportive policies. In January and February combined, the growth in retail sales slowed to 9.5%, to 5.79 trillion yuan ($837.87 billion). This is 0.7 of a percentage point less than a year-earlier and the first time in 11 years that China dropped into the single digits in this regard.
Evans-Pritchard noted that "consumption has been negatively affected by the partial rollback of tax cuts on car sales." Car sales in China last year saw a big leap, supported by policymakers' aggressive subsidizing and tax cutting. In January, the tax breaks became less generous.
Meanwhile, February's data also suggests that the government is struggling to control the red-hot housing market. Real estate investment increased 8.9%, up 2 points from last year's figure to 985.4 billion yuan. The increase came despite a series of curbs on real estate purchases that some policymakers began imposing in October in attempts to prevent speculative dealing.
Growth in real estate investment was partially "led by increasing materials prices, which have pushed real estate agencies to stock up on properties ahead of the March-April sales season," said Takamoto Suzuki, senior economist at Marubeni Research Institute in Beijing.
The data, released by China's National Bureau of Statistics, reflects a resilient economy. Industrial production rose 6.3% during January and February combined, while fixed asset investment surged 8.9%. Growth in both sectors came in higher than market expectations as polled by Thomson Reuters, which foresaw a 6.2% increase in industrial production and an 8.2% lift in fixed asset investment.
The data suggests policymakers are committed to achieving this year's growth target of "around 6.5% or higher," as announced earlier this month by Premier Le Keqiang during the opening session of the National People's Congress. The government has more or less set the target below last year's 6.7% growth as it pushes ahead with difficult economic reforms.
Economists, however, are not so impressed with the numbers. "Ahead of the 19th [Chinese Communist Party] National Congress in the fall," said Toru Nishihama, chief economist at Dai-ichi Life Research Institute, "we all are well convinced that policymakers will achieve economic stabilization no matter what. There is no doubt about this. But we are not convinced that we will see similar growth without policy supports."
The annual session of the National People's Congress has done little to clarify the outlook of China's economy, Nishihama said. "All we heard was a series of empty slogans. There was not a single detail of how to shift from investment-led growth to a consumption-based [economy]."
Julian Evans-Pritchard, an economist at Capital Economics, sees policymakers behind the current growth numbers. The momentum, he noted in a report, "remains heavily reliant on rapid investment growth." He said this "will be difficult to sustain, given clear signals that the fiscal and monetary policy stances will be less supportive this year."
Consumption data, also released on Tuesday, meanwhile, hints at what the economy might look like with less-supportive policies. In January and February combined, the growth in retail sales slowed to 9.5%, to 5.79 trillion yuan ($837.87 billion). This is 0.7 of a percentage point less than a year-earlier and the first time in 11 years that China dropped into the single digits in this regard.
Evans-Pritchard noted that "consumption has been negatively affected by the partial rollback of tax cuts on car sales." Car sales in China last year saw a big leap, supported by policymakers' aggressive subsidizing and tax cutting. In January, the tax breaks became less generous.
Meanwhile, February's data also suggests that the government is struggling to control the red-hot housing market. Real estate investment increased 8.9%, up 2 points from last year's figure to 985.4 billion yuan. The increase came despite a series of curbs on real estate purchases that some policymakers began imposing in October in attempts to prevent speculative dealing.
Growth in real estate investment was partially "led by increasing materials prices, which have pushed real estate agencies to stock up on properties ahead of the March-April sales season," said Takamoto Suzuki, senior economist at Marubeni Research Institute in Beijing.