You are here: Home » Reuters » News
Business Standard

Trump tech tariff threat overshadows strong China factory, investment data

Reuters  |  BEIJING 

(Reuters) - China's industrial output grew more strongly than expected at the start of the year, suggesting the economy has sustained solid momentum even as U.S. readies hefty tariffs against one its most strategic growth drivers -- technology.

Tariffs on tech exports could potentially hit the fastest growing segment of China's industrial sector, an area that the country's leaders have been keen to promote as they push for "higher quality" economic growth.

Trump is seeking to impose tariffs on up to $60 billion of Chinese imports in the very near future and will target the technology and telecommunications sectors, reported on Tuesday.

The latest U.S. trade threat, which follows the imposition of tariffs on and aluminium last week, overshadowed unexpectedly robust Chinese industrial and investment growth data for the first two months of the year.

Industrial output in January-February rose 7.2 percent from the same period a year earlier, the said on Wednesday, surpassing analysts' estimates for a rise of 6.1 percent and picking up sharply from 6.2 percent in December.

Analysts had expected a slight stumble in output due to a crackdown on heavily polluting industries, but the data showed China's output rose to its highest in months as mills prepared for a seasonal pick-up in construction in spring.

Coal and power output were also up sharply, possibly reflecting a spell of bitterly cold weather.

Reflecting China's growing focus on the production of higher-value goods, output of computers, and other rose 12.1 percent on year, extending a long period of double-digit growth.

Output of industrial robots rose around 25 percent.

However, data from early in the year is typically treated with caution due to distortions caused by the timing of the week-long Lunar New Year celebrations, which fell in late January 2017 but started in mid-February this year.

As such, a clearer picture of China's economic health may not emerge until first-quarter data is released in April.

Many economists expect China's economic momentum to slow this year, weighed down by a cooling property market and the government's clampdown on riskier lending practices, which is pushing up corporate borrowing costs.

But a clutch of readings available so far, ranging from official data to private surveys, suggest China's growth has picked up so far this year, keeping a synchronized global recovery on track.

Trade data last week showed exports unexpectedly surged at the fastest pace in three years in February even as trade relations with the rapidly deteriorate.

runs a $375 billion trade surplus with the and when Xi Jinping's top visited recently, the administration pressed him to come up with a way of reducing that number.

"While risks of escalation in US-trade tensions exist, we expect China to remain relatively restrained in its response and, as a result, overall economic damage to stay contained," Louis Kuijs, of economics at said in a note.


China's fixed-asset investment growth also unexpectedly picked up to 7.9 percent in January-February. Analysts polled by had predicted it would cool to 7.0 percent from a 7.2 percent pace in all of 2017.

Private sector fixed-asset investment rose 8.1 percent, compared with an increase of 6.0 percent in 2017. Private investment accounts for about 60 percent of overall investment in China.

Investments by state firms rose 9.2 percent over the period, though the gap between public and private sector investment narrowed over last year.

Confounding expectations of a slowdown, in China rose 9.9 percent, the fastest pace in three years, though property sales softened in the face of government cooling measures.

While infrastructure remains the main engine behind China's investment growth, economists at ING note investment in has also expanded rapidly, and was up 17 percent last year, further highlighting the sector's vulnerability to punitive U.S. trade measures.

also regained some momentum, rising 9.7 percent, just shy of expectations but up from 9.4 percent in December. Auto sales were particularly strong, especially electrics and hybrids, again reflecting Beijing's tech push.

said last week China aims to expand its economy by around 6.5 percent this year, the same target that it handily beat in 2017 thanks in part to massive government infrastructure spending and

But comments by top officials at in the past week suggested that will be more cautious about spending this year while it focuses on reducing the risks from a rapid build-up in debt.

After years of heavy pump-priming by Beijing, markets worry that less generous stimulus could slow the pace of expansion not only in China but globally. China is already believed to be contributing about a third of total world growth.

(Reporting by and Cheng Fang; Writing by Elias Glenn; Editing by Kim Coghill)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Wed, March 14 2018. 09:22 IST