MNI DATA ANALYSIS: Property Investment Drives China Growth

     BEIJING (MNI) - China's economy remained under pressure in the early months

of 2019, the industrial activity and consumption data released Thursday by the

National Bureau of Statistics (NBS) suggest. 

     The NBS published combined data for the first two months to iron out

seasonal volatility caused by annual shifts in the timing of Chinese New Year

(CNY).

     One bright spot is fixed-asset investment(FAI), which rose 6.1% y/y in

January and February, beating the 5.9% median in an MNI survey. Investment YTD

continued to edge up for the fifth consecutive months from the low of 5.3% seen

in the Jan-Aug period last year.

     --STRONG PROPERTY INVESTMENT

     The bounce was mainly driven by strong property investment that offset a

slowdown in manufacturing and infrastructure investment. Property investment

rose to 11.6% y/y in the Jan-Feb period. The YTD data was the highest since

2015's 10.4% for the same period. In particular, investment in residential

housings grew by 18% y/y, contributing 72.1% to the total property investment.

     However, the sub-indicators told another story. The total areas of

commercial housing sold fell by 3.6% y/y in Jan-Feb, compared with the 1.3% gain

in 2018. This came with a sharp contraction in the sales growth, which

decelerated to 2.8% y/y from 2018's 12.2%. Both reflect a slowing housing

market, though buyers tend to postpone home purchases during the New Year

period.

     Newly started housing construction areas and land purchases which indicate

future activities also saw downturn pressure, growing 6.0% and -34.1% y/y,

compared with the 17.2% and 14.2% gain in 2018, respectively.

     The pullback in housing starts confirms earlier signs that developers have

turned more cautious in recent months, and that a slowdown in property

construction is likely to weigh on growth in the coming months, Capital

Economics said in a note.

     While manufacturing investment further slowed to 5.9% y/y in Jan-Feb from

2018's 9.5%. Infrastructure investment recorded 4.3%, picking up 0.5 percentage

point from 2018. It is much anticipated to rise and drive the growth, given that

a larger scale of local government bonds is to be issued this year.

     --INDUSTRIAL ACTIVITY BOTTOMED

     Industrial output grew 5.3% y/y in the first two months, just shy of the

5.5% forecast by analysts polled by MNI. The YTD data was the lowest since

2009's Jan-Feb.

     The NBS said growth would be 6.1% if excluding the CNY factor. It is

believed the figure is mainly dragged down by the high base, as the holiday came

in much earlier than last year.

     Industrial production could have reached the near-term bottom and it is

very likely to rebound next month, wrote Deng Haiqing, chief economist at

WallStreet.CN.

     Auto production declined 5.3% y/y in Jan-Feb, extending the 4.1% drop in

December last year.

     --WEAK CONSUMPTION

     Retail sales growth was 8.2% y/y in the first two months, in line with the

8.2% forecast in an MNI survey. It continued to linger around the low levels

seen at the end-2018

     Auto sales declined 2.8% y/y in the first two months, declining at a slower

pace compared to December's 8.5% drop. Clearly, the smaller loss helped to prop

up the overall consumption.

     Concerns over the country's outlook have led consumers to curtail

purchases, and pressure on household income growth still dampen their appetites.

It seems recently announced tax cut for individuals has yet to feed through to

the consumption. 

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

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

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