China’s economy expanded at 6.4% year over year in March. That beat the 6.3% expected by economists surveyed by Briefing.com. That projected 6.3% growth itself marked a step up in optimism about China’s economy. Other official numbers reported over night also showed the economy picking up speed–modestly. Factory output in March rose by 8.5% year over year–against a 5.3% year over year rate in February and expectations for 5.6% growth. Retail sales for March climbed 8.7% year over year versus expectations for 8.3% growth. Fixed asset investment rose by 6.3% year over year versus 6.1% in February. Car production climbed in March for the first time since September. Aluminum and Steel output reached records in the quarter.
All this is the result of stimulus poured into the Chinese economy by the government and the central bank. And there’s more to come. The government is drafting measures to bolster sales of cars and consumer electronics. The central bank is rolling out efforts to make more capital available to and through banks. The government looks to be front-loading spending in an effort to push growth higher. And there’s evidence that Beijing is pulling back on regulations, such as those on environmental pollution, that cost companies money.
One big uncertainty here (besides the question of how sustainable this all is) is how a pickup in Chinese economic growth will affect talks to settle the U.S.-China trade war. Comments from U.S. negotiators indicate that the White House team has been assuming (or hoping anyway) that slower growth in China would put pressure on Beijing to come to an agreement on outstanding contentious items such such as protection for intellectual property and forced technology transfers by overseas companies as the price of getting access to the Chinese market.
I’m sure it has occurred to you that maybe, just maybe, the Chinese government has engineered this pickup in growth precisely to avoid getting caught in a position of weakness in these talks.
