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China's GDP growth holds steady at 6.8% in January-March

Trade row with US clouds economic outlook as Beijing seeks quality expansion

A container ship is docked at a port in Lianyungang, Jiangsu province. China's strong exports helped offset weak infrastructure investment and slow property sales in the January-March period.   © AP

BEIJING -- China's inflation-adjusted gross domestic product rose 6.8% in the January-March quarter from the same period a year earlier, unchanged from the previous quarter, the National Bureau of Statistics said Tuesday.

Strong exports helped offset weak infrastructure investment and slumping property sales due to stricter financial regulations. But the outlook for exports remains cloudy as trade frictions with the U.S. rise.

China's economy has posted real, year-on-year growth of 6.8% for three consecutive quarters, expanding at a faster pace than the government's target of around 6.5% for the whole of 2018. The growth rate for the latest quarter beat the average market forecast of 6.7% in a joint survey by Nikkei and Nikkei Quick News.

The economy grew by 1.4% in the first quarter from the preceding three months, down from a 1.6% pickup in the October-December quarter of 2017. The annualized, quarter-to-quarter figure -- the standard measure of economic growth used in industrialized countries -- was around 5.7%. 

The nominal quarter-over-quarter growth rate, a more accurate indicator of how people feel about economic conditions, was 10.2%, down from the 11.1% jump in the last three months of 2017.

Economic data released on Tuesday also showed investment in fixed assets such as condominiums and factories grew 7.5% in the first three months from a year earlier. The pace of growth slowed down from the 9.2% expansion a year earlier. 

The main factor behind the slowdown was a decline in investment growth in roads, airports and other infrastructure to 13%, compared with a 23.5% surge a year earlier.

Real-estate sales also weakened, with the total area of properties sold increasing only 3.6%, slowing sharply from the torrid 19.5% growth rate in the year-earlier period.

Weighing on growth were the government's efforts to curb the property bubble. Regulators have maintained tight controls on property sales, especially in large cities, as well as forcing banks to tighten mortgage standards.

Consumer spending, while resilient, appears to lack strength. Total retail sales of consumer goods, which combine sales at department stores, supermarkets and online retail outlets, grew 9.8% from the same period a year ago in January-March. The rate slowed from 10.0% in the same quarter last year.

Exports grew at a faster pace of 14% in the three months to March, from 8% in the same period last year, supported by a global economic expansion led by the U.S. However, the outlook remains uncertain whether exports can maintain solid growth as trade frictions with the U.S. rise, especially given that the figure for March alone declined.

Industrial production from January to March increased 6.8% from the same period a year ago, unchanged from a year earlier. The brisk pace was driven by semiconductors. A warm winter also meant higher demand for heating, resulting in greater power generation.

Since the National Congress of the Communist Party in October, President Xi Jinping's government has said it wants to shift its focus to quality growth from sheer volume. It says it now attaches more importance to managing pollution and dissatisfaction about income disparities over spurring growth through infrastructure investment. 

That could set the stage for a gradual growth slowdown, but the risk of a sharp downturn remains should exports suddenly fall amid rising trade frictions with the U.S.

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