MNI DATA ANALYSIS: China Q4 GDP Data Flags Weakening Demand

--China GDP Annualised 6.8% In Q4; FY 2017 6.9%

--Consumption Growth Slower,Dec Annual Sales Growth Lowest Since 2004

     BEIJING (MNI) - China recorded annualised GDP growth of 6.8% in the fourth

quarter and an annual growth rate of 6.9% in 2017, according to National Bureau

of Statistics (NBS). However, although Q4 slightly exceeding the market

expectations of 6.7% growth, as seen in the MNI survey, historically low retail

sales growth in December raised concerns over weaker domestic demand.

     --SLOWER CONSUMPTIOON GROWTH

     Retail sales grew 9.4% y/y in December, the slowest pace since February,

2004, and below the market expectation of a 10.2% gain, again as seen in MNI's

latest survey. The fall in sales was in line with the weak December import data.

     Moreover, consumption spending contributed just 58.8% of GDP growth in

2017, much lower than 64.5% in the first three quarters in 2017 and 64.6% in

2016, pointing to weaker domestic demand.

     In the past, retail sales growth dipped below 10% a few times, although

always bounced back immediately after every occurrence from 2003. Therefore,

more evidence may be needed before concluding that domestic demand has weakened.

     Another point worth noting is rising inequality, which will curb

consumption growth. That is indicated by the difference in growth rates of

median and average disposable incomes. According to NBS, average and median

disposable incomes grew 9.0% and 7.3% in 2017, respectively, compared with 8.4%

and 8.3% in 2016.

     --PROPERTY INVESTMENTS GAIN

     Property investment in December slowed by 0.5 percentage point to 7% in

full-year 2017 from the first 11 months. Full-year 2017 was still 0.1% higher

than 2016.

     MNI's recent analysis saw a strong pick-up in the property sector in

lower-tiered cities due to looser controls and China's urban renewal projects,

which helped drive investment growth in 2017. 

     Growth in property sales slowed to 7.7% in 2017 from the 22.5% growth seen

in 2016. It was also lower than the 7.9% in the first 11 months. The NBS doesn't

give single-month data. Yan Yuejin, director of the E-house Real-Estate Research

Institute, told MNI that sales by area volume in December reported the best

result in nearly 30 years.

     Property sales by value dipped to a 13.7% gain in 2017 from 34.8% growth in

2016, showing price gains were effectively contained after the government rolled

out a host of measures to curb surging prices.

     However, property developers remain upbeat over the outlook for the sector

given strong sales and low inventories.

     Housing starts, an indicator of future property investment, provide support

to the upbeat outlook. Starts strengthened by 0.1 percentage point to 7% from

6.9% in the first eleven months, though below the 8.1% gain in 2016.

     --INVESTMENT GROWTH LOST STEAM 

     Fixed-asset investment rose 7.2% from 2016, the lowest pace since 1999, and

lower than the 8.1% year-on-year growth in 2016. It was the ninth consecutive

month this year that the year-to-date investment growth rate has slowed.

     The growth rate was dragged lower by the investment by state-owned

enterprises, which grew 10.1% in 2017, sharply down from the 18.7% in 2016.

However, private sector investment, although remaining relatively low, picked up

to 6.0% from a 3.2% gain in the previous year.

     Infrastructure investment growth rose to 19% y/y, 1.1 percentage points

lower than the January-November period, but still above the 17.4% in 2016.

Infrastructure investment has played a leading role in supporting economic

growth this year, and MNI expects it to continue into 2018.

     Pan-China property investment growth stood at 7.0%, lower than 7.5% in the

first 11 months, but higher than the 6.9% gain in 2016, suggesting the

government's policies to curb the property sector showing good effects.

     Investment in manufacturing grew 4.8% y/y in December, up from 4.1% in the

first 11 months.

     --INDUSTRIAL OUTPUT HIGHER

     Industrial output grew 6.2% in December, higher than market expectations of

6.0% and also higher than the 6.1% growth in November. It grew 6.6% in 2017 year

on year, rising from 6.0% in 2016.

     In 2017, industrial output growth shows a pattern of ending the quarter on

an upbeat note, although the December outperformance was lower than in March,

June and September.

     The manufacturing sector and heat, electricity, gas and water providing and

supply sector grew a respective 7.2% and 8.1% annually in 2017, higher than the

6.8% and 5.5% seen in 2016.

     The mining sector contracted 1.5% in 2017, compared with a 1.0% contraction

in 2016.

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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