Chinese growth bolsters global economy
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Chinese growth bolsters global economy

China’s economy has roared forward in the first quarter of 2017, logging its first back-to-back acceleration in seven years. While U.S. consumers have shown signs of weakness recently, the Chinese economy has bolstered the global outlook, and looks set to power a third of all growth in 2017.

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Coming off a successful 4Q2016, the Chinese economy managed to pick up speed in the first quarter of 2017, hitting a better-than-expected growth rate of 6.9%. Housing, infrastructural investment, exports and continually positive retail figures are all contributory factors to the country’s success over the last three months.

The country has the second largest economy in the world, and in 2016, it accounted for a third of global growth. It is on track to make a similar contribution – at least – this year. Rob Subbaraman, chief economist for Asia ex-Japan with Nomura Holdings Inc., told Bloomberg:

“China, at least in the near term, is in a sweet spot with growth momentum strong and inflation pressures easing. Whichever way you dice it, the first quarter was a strong set of numbers.”

The Chinese government’s own growth target is 6.5% or more for the year – and, against the backdrop of a politically volatile world, policymakers will be relieved to see their predictions holding up.

These figures suggest that the Chinese rebalancing act – moving from an exports-led economy to one predicated on services and consumption – is progressing smoothly. This is good news for China, but it’s also good news for its neighbours. According to Rajiv Biswas, Asia-Pacific chief economist at HIS Markit:

“Emerging markets will benefit from this strength in Chinese growth firstly through commodities demand and support for commodity process. Secondly, the whole Asian manufacturing supply chain will get a boost from stronger Chinese growth.”

Disclosure

The opinions in this article do not reflect those of Dominion Fund Management Limited, and in the instance of any forward-looking statements, these should not be construed as advice.


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