According to a recent Bloomberg report, the first quarter of 2017 marked a continued acceleration of the Chinese economy. Combined with acceleration in the last quarter of 2016, this marks the first back-to-back acceleration in the Chinese economy in seven years. This news come amidst reports of subdued consumer spending in the United States. Projections indicate that China will make up approximately one-third of growth in the global economy by the end of 2017.
The Chinese economy exceeded projections by accelerating to 6.9%.
Factors include strength in housing, investment in infrastructure and strong exports and retail sales. China also managed to avoid projected problems with runaway debt growth. The country is experiencing a transition from reliance on heavy manufacturing to an economy based more on services and consumer demand. The Chinese government has set a goal of 6.5% growth for the year.
China’s accelerated growth is good news for the Asia Pacific region, particularly for countries with emerging markets. What it means for the US is less clear, particularly as the American economy experienced a decline in inflation and retail sales in March. Chinese officials are under pressure to avoid a trade war with the US, and are currently in the midst of a “100-day plan” for negotiating trade ties with the Trump administration.
China’s economy also has it’s own problems to contend with. Much of the current acceleration in growth comes from fiscal stimulus that some economists believe to be unsustainable. Debt escalation is currently being masked by increasing house prices and land values. The Chinese government will also likely experience changes in leadership later in the year, adding to the uncertainty. For now though, Chinese expansion is a largely welcome boost to a still recovering global economy.
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