BEIJING, March 14 China's factory output and
fixed-asset investment grew more strongly than expected in the
first two months of the year, but retail sales disappointed
after the government reduced a tax break on small cars.
Industrial output rose 6.3 percent in January-February from
the same period a year earlier, fixed-asset investment 8.9
percent and retail sales 9.5 percent.
The overall readings are likely to reinforce views that the
world's second-largest economy is on a steady growth path,
despite worries about the risks of slightly tighter credit
policy this year and a surge in U.S. trade protectionism.
China combines January and February activity data in a bid
to smooth out seasonal distortions caused by the timing of the
long Lunar New Year holidays, which began in late January this
year but fell in February last year.
Analysts polled by Reuters had predicted factory output
would growth 6.2 percent in the first two months this year,
picking up from December's 6.0 percent as demand for
manufactured goods improves at home and abroad.
China's steel mills are churning out as much metal as
possible, enjoying their best profits in years, even as they
worry that a year-long rally in prices in the world's top
steelmaking market is running out of steam, executives said.
Analysts had expected fixed-asset investment growth of 8.2
percent, quickening from 8.1 percent in the whole of 2016.
In welcome news for policymakers, growth in private
investment quickened to 6.7 percent from 3.2 percent last year,
the National Bureau of Statistics said on Tuesday, suggesting
private firms are growing more optimistic about the business
outlook after a sharp loss of momentum in the last few years.
Private investment accounts for about 60 percent of overall
investment in China.
But many small- and medium-sized private firms still face
tough access to financing, tight profit margins and a crowding
out by big state companies.
Chinese policymakers have been trying to lure private
investors into big infrastructure projects through
public-private partnerships, but many lucrative sectors are
still dominated by state firms.
Retail sales growth was well below expectations, however,
coming in at 9.5 percent versus economists' expectations of 10.5
percent and 10.9 percent in December.
Auto sales dipped in the first two months of the year,
according to government data. While that contrasted with
industry estimates of 8.8 percent growth, auto makers in China
expect full-year growth to slow as the government rolls back
incentives on small-engine cars.
Other economic readings in recent weeks, including a surge
in imports and rising producer prices, have added to signs of
resilience in the economy.
China's first-quarter economic growth could accelerate to 7
percent year-on-year, from 6.8 percent in the last quarter,
economists at OCBC wrote in a note last week, while adding the
pace may ease beginning in spring.
China is targeting growth of around 9 percent in fixed asset
investment for 2017, while retail sales were expected to
increase about 10 percent, the state planner said during the
nation's annual parliamentary session this month.
China has cut its economic growth target to about 6.5
percent this year to give policymakers more room to push through
painful reforms to contain financial risks. The economy grew 6.7
percent in 2016, the slowest pace in 26 years.
The central bank has inched up short-term interest rates
twice so far this year to encourage companies to deleverage and
markets expect further modest increases in coming months. But
the head of the central bank last week conceded it will take
some time to bring debt levels down to more manageable levels.
(Reporting by Beijing Monitoring Desk and Elias Glenn, Writing
by Kevin Yao; Editing by Kim Coghill)