China Has Strongest Economic Quarter In 18 Months

The slowdown of China’s economic growth has had markets concerned, but new data suggests the nation could be on its way to reversing the trent.

Reports in the Financial Times on Monday (April 17) said China’s economy saw its strongest quarter in 18 months in Q1 2017, citing “industrial activity, property investment and credit growth” as key factors behind the 6.9 percent GDP annual growth rate.

That rate was higher than analysts’ expectations and may provide momentum for continued growth through Q2.

“China, at least in the near term, is in a sweet spot with growth momentum strong and inflation pressures easing,” said Rob Subbaraman, chief economist for Asia ex-Japan at Singapore’s Nomura Holdings, in an interview with Bloomberg.

“Emerging markets will benefit from this strength in Chinese growth firstly through commodities demand and support for commodity prices,” said Rajiv Biswas, APAC chief economist at IHS Markit in Singapore, in another interview with the publication. “Secondly, the whole Asian manufacturing supply chain will get a boost from stronger Chinese growth.”

But other analysts warn that the spike won’t last.

“This level of growth cannot be sustained,” said Wang Xinling, lead analyst at think tank China Policy, in an interview with the Financial Times. “The first quarter’s results were boosted by bank lending and a peak in starts of long-term construction projects. After this, the indicators will start to weaken.”

Reports also noted that, despite the spike, China’s economy is under significant flux.

“China has business cycles, with periods of expansion and contraction,” said Scott Kennedy, a scholar at the Center for Strategic & International Studies in Washington who specializes in Chinese business and political economy. “They are heavily affected y government interventions, in macro and micro policy, but they do exist.”

The nation is also in the midst of increasing corporate debt, reports said, with overall indebtedness nearing 300 percent.

“The apparent strength of Chinese GDP growth belies rising macroeconomic tension and financial system stresses, exemplified by high and rising levels of corporate leverages as well as a frothy housing market,” expressed Eswar Prasad, China finance expert at Cornell University, in another interview with the FT.