China is expected to report on Monday that its economy grew 6.8 percent in the first quarter, well above Beijing’s full-year target, buoyed by surging government infrastructure spending and a gravity-defying property market that is showing signs of overheating.
A strong reading could help wobbly global financial markets but add to worries that China’s government is still relying too heavily on old growth engines like stimulus and not doing enough to tackle risks from an explosive build-up in debt.
Though policymakers have pledged repeatedly to push reforms to head off financial risks and asset bubbles, the government is seeking to keep the world’s second-largest economy on an even keel ahead of a major leadership transition later this year.
Beijing has set a slightly more modest growth target of around 6.5 percent for this year, theoretically offering more wiggle room for reforms after the economy grew 6.7 percent in 2016 – the weakest pace in 26 years.
Most economists polled by Reuters expect the economy expanded 6.8 percent in the first quarter from a year earlier, the same pace as in the fourth quarter of 2016. On a quarter-on-quarter basis, it likely grew 1.6 percent in January-March from the previous three-month period.
Economists at ANZ reckon growth may even clock in at 6.9 percent in the quarter, pointing to strong property and infrastructure investment.
« The announcement in early April of the construction of the Xiongan new economic zone, which requires massive infrastructure spending, suggests Chinese authorities are likely to rely more on investment to stabilize growth in the next few years, » ANZ said in a note.
China’s long-ailing industrial sector has been posting its best profits in years, thanks to higher prices for steel and other building materials, giving « smokestack » industries more cash flow to pay off debt and invest in more efficient plants.
