World Economy

China says its economy grew 6.8% in the first quarter of 2018, topping expectations

Chinese first-quarter economic growth beats expectations
Chinese first-quarter economic growth beats expectations
Key Points
  • China reported first-quarter 2018 GDP growth of 6.8 percent, topping expectations.
  • Analysts polled by Reuters had expected first-quarter 2018 GDP growth at 6.7 percent, which would have been a tick down from 6.8 percent in the fourth quarter of 2017.
Chinese first-quarter economic growth beats expectations
Chinese first-quarter economic growth beats expectations

economy grew 6.8 percent in the first quarter of 2018, the country's statistics bureau reported on Tuesday.

That topped a consensus estimate of 6.7 percent year-over-year growth for the quarter, marking the third-straight quarter of 6.8 percent growth for the world's second-largest economy.

Although the headline figure signals a strong start to the year for China, there will be a "roll down in growth going forward," said David Fernandez, chief Asia Pacific economist at Barclays.

That is as real estate investment is expected to moderate as the government aims to curb excessive speculation in the sector, Fernandez told CNBC.

Beijing is also cracking down on environmental pollution from industry.

The latest figures may confirm that's occurring, with March industrial output growth slowing to 6 percent from a year ago, compared to the 7.2 percent for the January through February period.

In other data, January to March fixed asset investment growth slowed to 7.5 percent from a year ago, down from 7.9 percent in the first two months of the year. Economists had expected fixed asset investment to come in at 7.6 percent over the first three months of 2018.

However, retail sales beat expectations in March, rising 10.1 percent from a year ago, beating the consensus forecast of 9.9 percent.

Workers assemble bassinets at a factory in Fucheng County, north China's Hebei Province.
Ma Yu | Xinhua | Getty Images

Even though Chinese domestic demand is strong, Beijing will continue "tapping on the breaks" in its managed economic slowdown, said Fernandez. The country has "that space given how quickly things have gotten off post the party congress," he added, referring to the 19th Chinese Communist Party Congress last October.

"They are trying to deleverage the economy, they are also trying to reign in some of that credit growth," Sian Fenner, economist at Oxford Economics, said Tuesday.

The tightening of monetary policy and exports "still being quite supportive of growth but not quite accelerating at the same pace" will affect growth in 2018, Fenner told CNBC ahead of the data release.

Oxford Economic's full-year GDP forecast for China is 6.4 percent, which is a tick down from around 6.5 percent targeted by Beijing.

China's economy grew 6.9 percent in 2017, beating the official target of around 6.5 percent in part due to a synchronized global recovery.

China's strong growth last year came despite widespread concerns about financial risks in the East Asian giant amid a government-led economic restructuring. The world's second-largest economy has been fighting debt for years as it tries to balance economic stability against the potential fallout from any sharp deceleration.

Risks to the Chinese economy in 2018 include trade protectionism as U.S. President Donald Trump's administration bares its teeth to address the yawning trade gap between the two countries.