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Chinese economy shows signs of firming amid restructuring efforts

IANS  |  Beijing 

A slew of upbeat economic data released here on Monday pointed to latest restructuring achievements and provided fresh stabilisation signs for the Chinese economy.

Highly-watched economic figures, including industrial output, retail sales, fixed-asset investment and housing sales, indicated that the ongoing growth model transitioning is providing new impetus to the world's second largest economy, Xinhua news agency reported.

In the first four months, total retail sales of consumer goods rose 10.2 per cent year on year, 0.2 percentage points faster than the growth in the first quarter, buttressed by vigorous consumption growth in rural areas and online shopping, the National Bureau of Statistics (NBS) said.

"The figures indicate continued growth of domestic consumer demand, which was partly driven by consumption upgrades and new business patterns such as online sales," said NBS spokesperson Xing Zhihong.

China is moving toward an economy boosted by consumer spending, innovation and services, reducing reliance on investment and exports of low value-added goods and narrowing the income gap between urban and rural dwellers.

China's GDP growth in Q1 stood at 6.9 per cent, slightly up from 6.8 per cent in the previous quarter, with 77.2 per cent of that driven by consumption, 12.6 percentage points higher than the 2016 level.

China's value-added industrial output rose 6.5 per cent year on year in April, 0.5 percentage points higher than the same month last year, while profits at industrial enterprises above the designated size surged 28.3 per cent year on year in the first quarter.

"China's transition to slower but structurally rebalanced growth continues," the World Bank said in a recent report, noting that economic growth will continue to moderate as capacity is cut and credit kept on a tight leash.

China's investment in fixed assets rose 8.9 per cent year-on-year in the first four months of 2017, easing pace from 9.2 per cent in the first quarter but reflecting the ongoing restructuring of economy as investment growth rate in the service sector exceeded the industrial sector.

Investment in the industrial sector rose only 3.5 per cent in the first four months, a main drag on total investment growth, while investment in the service sector rose 12.1 per cent.

The robust economic growth momentum has supported job creation and new business registration. Some 4.65 million new jobs were created in the first four months, 220,000 more than the same period last year, and 556,000 new companies were registered in April alone.

China still has a long list of reform tasks, many intertwined with one another, which when added to global risks like US interest rate increases and protectionism makes policy-making tricky, analysts said.

"The economy continued to stabilise and positive factors were increasing. But both domestic and international environment is still complicated and structural contradictions have not been fundamentally eased," said Xing.

China should continue to reduce excess capacity, curb credit, lower debt leverage in the corporate sector and reform state-owned enterprises, said Sudhir Shetty, chief economist of the World Bank's East Asia and Pacific Region.

"Against the backdrop of the ongoing financial regulatory tightening, we may see a 'soft-patch' of economic data in the next couple of months amidst reduced inflationary expectations and rising risk premium," investment firm China International Capital Corporation said in a note.



(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, May 15 2017. 17:26 IST