Chinese economy picks up pace for the first time in two years

BEIJING — China’s economy accelerated for the first time in two years in the final quarter of last year, cementing an economic stabilisation that is giving Chinese leaders a buffer as they transition to a neutral policy and prepare for a trade battle with new United States President Donald Trump.

Gross domestic product rose 6.8 per cent in the three months through December from the corresponding period a year earlier, said the National Bureau of Statistics yesterday, better than the 6.7 per cent in the previous quarter. Although the full-year expansion of 6.7 per cent was well within the 6.5 to 7 per cent official target, it was below the 6.9 per cent growth a year earlier. It was also the slowest since 1990, when the economy grew only 3.9 per cent as a result of international sanctions following the 1989 Tiananmen crackdown.

China powered through a volatile start to the year, propelled by robust consumption from an increasingly wealthy middle class.

With manufacturing also rebounding and deflation tamed, the central bank is turning to neutral monetary policy to address a debt binge that inflated asset bubbles and may threaten the long-term outlook.

Among the other key Chinese data released yesterday, retail sales increased 10.9 per cent from a year earlier in December, the strongest reading in a year and more than the projected 10.7 per cent advance.

“As China’s traditional growth drivers of investment and exports have weakened, Chinese private consumption has become the key engine for economic growth. This trend is expected to continue over the medium term,” said Mr Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight in Singapore.

That points to continued stable growth ahead of a twice-a-decade Communist Party leadership reshuffle this year. Consumption contributed 64.6 per cent to growth last year. Services, which accounted for more than half of output for the first time in 2015, made up 51.6 per cent last year, showed official data. Yet despite the solid headline figures, there are fears that deteriorating trade ties with the US will undermine exports from the world’s biggest trading nation.

Mr Trump has appointed three hardliners to run trade policy — Mr Robert Lighthizer as US Trade Representative, Mr Wilbur Ross as Commerce Secretary, and Mr Peter Navarro as head of the newly created White House National Trade Council.

Mr Lighthizer and Mr Navarro have accused China of unfair trade practices, while Mr Ross has branded the Asian giant as the “most protectionist country”.

Meanwhile, Mr Steven Mnuchin, Mr Trump’s pick for US Treasury Secretary, said during his confirmation hearing he would label China a currency manipulator if necessary.

“The key risk is Mr Trump’s trade policy. The external risk for China is obviously heightened, and at the same time how the Fed will move policy rates in the US,” said Mr Raymond Yeung, chief economist of greater China for ANZ Bank in Hong Kong.

Federal Reserve policymakers have signalled three US interest rate rises this year.

China’s growth is forecast to slow further this year, with economists surveyed by Bloomberg predicting full-year expansion will edge lower to 6.4 per cent, while the International Monetary Fund has projected a 6.5 per cent rate. AGENCIES