China set to release GDP data. Here’s how to read the ‘notoriously steady’ figures

This picture taken on January 1, 2017 shows Chinese workers loading boxes at a port in Lianyungang, east China's Jiangsu province.
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While China is widely expected to meet its government's 2016 growth targets with no surprises, there are underlying insights that can be gleaned from the GDP data due this Friday, economists said.

The world's second-largest economy likely grew 6.7 percent on-year in the fourth quarter, at the same pace as the previous three quarters, according to a Reuters poll of 42 economists.

The steady growth comes on the back of "strong activity in housing and manufacturing outweighing sluggish activity in heavy industry," said economists at Moody's Analytics in a weekly note.

The consensus forecast is also in line with estimates from the head of China's state planning agency, who said on Jan 10. that the economy likely grew around 6.7 percent last year, Reuters reported.

This may be China's slowest pace of growth in 26 years, but it remains within the range for Beijing to meet its longer-term goal of doubling GDP and per capita income by 2020 from 2010 levels.

"China's GDP is notoriously steady, with very little deviation from consensus…instead the nuances buried in data details may offer the only real glimpses beneath the GDP bonnet," said Vishnu Varathan and Chang Wei Liang, economists at Mizuho Bank, in a note last Friday.

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Varathan and Chang recommend that investors take note of the difference between nominal GDP and real GDP, as nominal growth only started overtaking real growth in 2016 and this is a key precondition to growing out of debt.

Data-watchers will also keep a close eye on whether fixed asset investments, a proxy for construction and infrastructure spending, have seen a meaningful bottoming as growth stabilizes, the Mizuho Bank economists added.

Lastly, investors will eye whether industrial activity deceleration has started to ease, although this will be a long-drawn process, Mizuho Bank said.

Brian Jackson, China economist at IHS Markit, told CNBC that "it would be more useful to look at sector level value-added growth to gauge the direction and pace of economic restructuring than official rhetoric."

China is set to announce a lower economic growth target for 2017 to around 6.5 percent, from last year's range of 6.5 to 6.7 percent, Reuters reported, citing people familiar with the matter who it did not identify.

In the past year, Chinese policymakers struggled to stabilize a credit-fueled economy by implementing painful reforms to cut industrial overcapacity, growing debt levels and an overheated property market.

Jackson warned that the biggest headwind for China's economy this year will be a "fairly painful cyclical downturn in the housing market, and a key factor in [IHS Markit's] slower forecast of 6.4 percent for 2017."

"While other issues will remain important to track, a housing sector correction will almost certainly be what dominates China's economic narrative in the year ahead," he added.

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