Recent data firing hopes of Chinese GDP growth

April 5, 2016 3:09 PM (UTC+8)

 

After a recent slew of economic signals showing positive effects from recent fiscal and credit policy support, the Chinese government is expecting a positive reading when it releases Q1 GDP data on April 15.

Chinese robotic welders
Chinese robotic welders

On Friday, China’s manufacturing sector reported it had expanded for the first time in nine months. The official purchasing managers’ index for the manufacturing sector rose to 50.2 in March, up from 49 in February. It was the highest level since August. The index for the service sector rose to 53.8, up from February’s 52.7, reversing a downward trend since December. A reading above 50 indicates expansion, while a reading below 50 represents contraction.

Consumer inflation rose to 2.3% in February from January’s 1.8%.

Many think the improvements are a result of a string of pro-growth measures by the government over the past two years.

With the economy posting growth of 6.9% last year, the lowest reading in a quarter century, China since 2014 has cut benchmark interest rates and banks’ reserve requirement ratio (RRR) multiple times, including a cut of 0.5 percentage points for commercial banks in early March, the first one this year.

China is aiming for a deficit-to-GDP ratio of 3% for this year, up from 2.3% in 2015, according to a government work report unveiled last month.

The projected deficit for 2016 is 2.18 trillion yuan ($335 billion), a rise of 560 billion yuan over last year. Home sales are expected to stay strong, boosting demand for related industries in both the manufacturing and services sectors.

For the first two months of the year, real estate investment rose 3%, up from a 1% increase for all of 2015, official data showed.

“Considering that current conditions remain uncertain, the government needs to continue with moderate stimulus measures to reinforce market confidence,” said Caixin chief economist He Fan.

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