The Chinese economy grew at an annual rate of 6.7% in the first quarter of 2016, slightly lower than the previous quarter but within the government’s targeted range of 6.5-7.0%, as strong performance from housing and infrastructure offset a slowdown from financial services (1).
An official from the Chinese National Bureau of Statistics (NBS) warned that although the data was positive and showed stabilising in the Chinese economy “we can’t be over optimistic (…) difficulties on structural adjustment persist and downward pressure on the economy cannot be ignored” (2).
Chinese economic growth is slowing as the country develops and moves away from a growth model based on manufacturing and investment to one focussed on servicing and private consumption.
The services sector growth remained above industrial growth, although the gap has narrowed as a result of government stimulus measures. Service sector growth was 7.6% in the first quarter compared with 5.8% for industry, against 8.3% and 3.9% respectively in the fourth quarter last year (1).
The growth rate matched economists’ expectations and suggest the economy is on track to meet the government’s targeted range of 6.5-7.0% for the full year. The rate is the lowest since the first quarter of 2009, when growth fell to 6.2% in the midst of the financial crisis (3).
Louis Kuijs, Asia economist for Oxford Economic noted that “The tried and tested stimulus measures of recent months have stirred up the physical part of the economy, especially towards the end of the first quarter, while consumption remained relatively robust” (1).
Raymond Yeung of ANZ however warned; “I would still be a bit cautious about headline growth… last year’s 6.9% figure was underpinned by a massive contribution from financial services, and the strong loan and credit growth recently and the recent resumption of IPO activity suggests this could still be a big contribution” (2).