China's economic performance lifts global outlook as U.S. consumer weakens

China’s economy stormed back in the first quarter, clocking its first back-to-back acceleration in seven years and bolstering the global growth outlook just as signs of subdued consumer spending have surfaced in the U.S.

The Chinese economy accelerated to a better-than-expected 6.9 percent, powered by strength in housing, infrastructure investment, exports and retail sales. And it looks to have done so without worsening credit risks, a welcome development for economists worried about the nation’s towering debt burden.

The world’s second-biggest economy accounted for about one-third of global growth last year and, given the strong first quarter data, is on track to contribute at least as much in 2017, according to Rob Subbaraman, chief economist for Asia ex-Japan at Nomura Holdings Inc. in Singapore.

“China, at least in the near term, is in a sweet spot with growth momentum strong and inflation pressures easing,” said Subbaraman. “Whichever way you dice it, the first quarter was a strong set of numbers.”

The robust economic showing is an auspicious start to a politically eventful year for President Xi Jinping and Premier Li Keqiang, whose government has set a growth target of 6.5 percent or above. Policymakers are bent on steady growth to ensure a smooth leadership reshuffle expected later this year.

Rebalancing

The Chinese economy is in the midst of a major structural shift away from its past reliance on heavy manufacturing and export-led growth toward services and consumer demand. Officials are also trying to avert a trade war with the U.S., manage capital outflows amid depreciation pressure on the yuan, and slow the growth of household, corporate and government debt.

For the world economy, the Chinese rebound may deliver positive second-round effects.

“Emerging markets will benefit from this strength in Chinese growth firstly through commodities demand and support for commodity prices,” said Rajiv Biswas, Asia-Pacific chief economist at IHS Markit in Singapore. “Secondly, the whole Asian manufacturing supply chain will get a boost from stronger Chinese growth.”

China’s imports from the Association of Southeast Nations surged 22.7 percent in March from a year earlier while those from Singapore were up 41.5 percent. From commodities exporter Australia, imports jumped almost 75 percent.