Sun Sentinel Palm Beach Edition
China’s economy not as bad as Trump thinks
BEIJING — China’s economy has again defied President Donald Trump’s predictions that it is in trouble, with official statistics showing that it grew by a surprisingly robust 6.4 percent in the first three months of the year.
Although analysts are skeptical about Chinese data, and although the figures showed the growth was fueled largely by unsustainable government spending, the numbers underscore the resilience of the world’s second-largest economy.
“Trump should realize this is a sign that China’s economy is not about to fall off a cliff,” said Andrew Polk of Trivium China, a consultancy.
As the United States and China edge toward a deal to end their protracted trade war, Trump has repeatedly suggested that Beijing is desperate for a deal because its economy is in trouble. By contrast, he has bragged about the United States’ improving economy and buoyant stock markets.
But the reality is not quite so black-and-white.
The National Bureau of Statistics said the Chinese economy grew by 6.4 percent compared with the first quarter of last year, maintaining the pace recorded in the previous three months.
“The national economy enjoyed stable performance and growing positive factors, stronger market expectations and confidence,” bureau spokesman Mao Shengyong told reporters Wednesday.
But he also struck a cautious note. “However, at the same time, we should also be aware that ... the task of reform and development is arduous, and downward economic pressures still persist,” he said.
Growth in the first quarter was supported by infrastructure spending and bonds issued by local governments. The government was trying to “front-load” this spending to boost statistics, economists said.
“The latest growth numbers suggest that the government’s stimulus measures are taking hold and stabilizing growth,” said Eswar Prasad of Cornell University, although he warned this could create bigger financial risks for the future.
China’s industrial production grew a much stronger-than-expected 8.5 percent in March from a year earlier, the biggest jump in more than five years and far exceeding expectations. That suggested it was a one-off blip.
Chinese authorities have also injected record amounts of money into the financial system to stave off the slowdown, perhaps so as not to appear weak while the trade negotiations continue. Bank loans hit a record high of $865 billion during the first quarter.
The trade war has had a relatively small effect on China’s economy. The Organization for Economic Cooperation and Development, a group of rich nations, estimates that the trade war has shaved onequarter of a percent off the growth rate in both China and the United States.
Overall, it will reduce total world trade by 0.4 percent by 2020, OECD Deputy Secretary General Ludger Schuknecht said in Beijing this week.
Recent statistics, combined with murmurings about a trade deal, suggested that there was reason to be more optimistic about China’s economy than even a few months ago, Prasad said.
Economists at UBS upgraded their forecast for Chinese growth this year from 6.1 percent to 6.4 percent.
During a major Communist Party meeting in March, Premier Li Keqiang set a growth target of 6 to 6.5 percent for this year.
The OECD this week warned about the rising financial risks in China from high corporate debt.
In its latest report on the Chinese economy, the OECD said China should avoid channeling its fiscal stimulus to state-owned enterprises and local governments. In many provinces, public debt exceeds annual revenue, sometimes by a large margin, it says.