Effect and cause


March data was roundly better than expected. Value-added industrial output, a rough proxy for economic growth, expanded 7.6% from a year earlier, accelerating from a 6.3% increase in the first two months of 2017. Retail sales surged a surprising 10.9% in March from a year earlier, from a 9.5% increase in February.

Electricity consumption and rail freight—viewed by many economists as more reliable indicators of demand than China’s headline gross domestic product figure—also posted strong increases in the first quarter. China’s official manufacturing purchasing managers index also hit a five-year high in March, its eighth consecutive month in expansionary territory.

A still-robust property market contributed to demand. Investment in buildings, factories and other fixed assets grew 9.2% in the first quarter, speeding up from the 8.9% expansion in the first two months. Even though home-sales growth slowed slightly, construction starts rose 11.6% for the full January to March period

And then there’s this:

Credit last year grew at a pace more than twice as fast as the economy, with total debt now at an estimated 277% of the economy, up from 125% at the end of 2008.

Stay tuned.

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