Prices of new homes in China rose at the fastest pace in 21 months in March, in the latest sign of green shoots for the world’s second-biggest economy as it recovers from three years of pandemic restrictions and Beijing eases up a crackdown on the debt-laden property sector.
New home prices rose 0.5 per cent on the previous month, according to official data, following a 0.3 per cent increase in February.
The positive data signalled some relief for China’s ailing property sector, which has suffered a liquidity crisis over the past two years, and followed better than expected export figures released last week, as China’s trade was buoyed by shipments of electric vehicles and their components as well as an increase in trade with Russia.
The encouraging data came ahead of China’s first-quarter gross domestic product figures, set for release on Tuesday. Economists polled by Reuters forecast growth of 4 per cent for the first three months of the year as Beijing chases a full-year target of 5 per cent.
The People’s Bank of China on Monday kept its one-year medium-term lending facility rate — which sets the floor for the country’s benchmark interest rate — at 2.75 per cent. Analysts said the lack of easing from the central bank suggested that the first-quarter GDP data was expected to be on target.
China posted GDP growth of just 3 per cent last year, falling short of a 5.5 per cent target that was already the lowest in decades and raising concerns about a structural slowdown in the economy’s expansion.
“If the GDP report [for the first quarter] comes in close to market expectations then the speed of the economic recovery is on track,” said Iris Pang, chief greater China economist at ING. She added that with growth forecast to continue rising in the second quarter, “we expect the PBoC to keep interest rates unchanged”.
Nomura analysts noted on Monday that electricity consumption growth had increased “markedly” to 5.9 per cent year on year in March, from 2.3 per cent over the first two months of the year.
This was evidence that China’s economy had entered a “sweet spot” in the wake of Beijing suddenly dropping President Xi Jinping’s zero-Covid controls in late December and backing off from property sector tightening, they said.
Still, Beijing’s growth target for 2023 is the lowest in decades, and economists have warned of an uneven recovery despite the fledgling signs of improvement in exports and the property sector.
One crucial area of concern for the pace of the recovery is the strength of consumer services, a driver of economic and jobs growth for the country of 1.4bn.
China last week reported softer than expected consumer price data, with a 0.7 per cent year-on-year increase for March, trailing forecasts of 1 per cent.
Citi said the weak inflation result signalled that “this year’s consumption recovery will be a recovery of two halves”.
“Services recovery is steady, but it’s not a supercharged rebound,” the US bank’s analysts said. “Meanwhile, goods consumption could be struggling with the payback of stimulus support, especially for autos,” they added, noting that it “could also take some time for the property stabilisation to benefit related downstream consumption”.