MoneyNewsTop News

Construction and production supported the growth of China’s GDP

CHINA (OBSERVATORY) –¬†Exceeding the expectation in the I quarter of China’s economic growth was due to growth in construction and industry, while the slowdown in the growth of services and agriculture affected it negatively, according to official data.

The construction sector and manufacturing grew by 6.3% year-on-year, accelerating from 5.7% in the fourth quarter, according to more detailed data published by the National Bureau of Statistics the day after the data on quarterly GDP.

In January-March, China’s economy grew by 6.8%, outstripping expectations for growth of 6.7%, supported by sound investments in real estate and sustainable consumer demand.

Production also recovered at the beginning of this year, after the authorities lifted restrictions on the operation of industrial enterprises in the winter, and steel mills increased production, as construction returned to high rates of work.

But economists still expect the PRC economy to lose momentum in the coming quarters, as Beijing forces local governments to delay infrastructure projects to contain their debt, and property sales have cooled against the backdrop of a stiff struggle against speculation.

More than 100 cities have implemented some measures to cool house prices. Nevertheless, analysts expect a moderate increase in prices in a huge number of small cities in China, where the rules are not so stringent.

“We believe that a sharp increase in industry and construction will be short-lived, as the temporary increase in the activity of enterprises from the weakening of pollution control leads to a reduction and tightening of restrictions on extrabudgetary spending by local authorities with respect to investment in infrastructure,” said Julian Evans-Pritchard , senior economist for China in Capital Economics.

According to Reuters, based on data from the Bureau of Statistics, China’s construction and production accounted for 39% of gross domestic product (GDP) in the first quarter, which roughly corresponds to the 41% share in the previous quarter.

The service sector continued to be the largest contributor to GDP, accounting for 57% of China’s output in the first quarter.

Services grew by 7.5% compared to the previous year, slowing from 8.3% in the IV quarter, while in January-March, agriculture grew by 3.2%, down from 4.4% in the previous three months .

Real estate rose 4.9% in the first quarter, which is slightly faster than 4.8% in the previous quarter.

Housing and food increased by 7%, slightly changing from 7.1% in October-December.

The retail and wholesale sector slowed slightly to 6.8% from 6.9% in the previous quarter.

Evans-Pritchard said that the sector is facing a headwind, as real estate sales and retail sales are vulnerable to a weakening labor market, a slowdown in lending growth and government control of property purchases.

The technical sector maintained double-digit growth in the first quarter, although its rate somewhat slowed to 29.2% from 33.8% in October-December.