China economy starts 2017 on strong footing, economists say

China's economy began 2017 on solid footing, as private sector investment accelerated alongside stronger industrial output.

Nevertheless, economists were still expecting to see a slowdown in growth over the course of 2017 as tighter monetary and fiscal policies weighed on activity.

Fixed asset investment increased at a 8.9% year-on-year pace in January and February, according to the National Bureau of Statistics, versus a rise of 8.1% for December.

In parallel, private investment growth jumped from a 3.2% clip to 6.7%.

Industrial output was also ahead of forecasts, rising by 6.3% year-on-year, versus a 6.0% gain in December.

To take note of, over the weekend some officials in Beijing had hinted at an improvement in industrial production, albeit without providing an exact number.

Furthermore, as Julian Evans-Pritchard at Capital Economics pointed out: "In any case, the headline figures for industry are generally too stable to tell us a great deal and appear to suffer from many of the same distortions as the official GDP figures. As such, we put more weight on the underlying data on the output volumes of individual industrial products."

Production of steel and other metals grew more quickly in the first two months of the year and the fall in cement output was less than in December.

However, electricity output, together with that of glass, industrial robots, cars and phones all slowed, he pointed out.

Nominal retail sales growth slowed from a 10.9% year-on-year clip to 9.5%. Although retail sales tend to fall at the beginnin go each year due to chnages in how they are measured, this time around the breakdown of the figures did suggest the rollback of tax cuts for car sales had a negative impact, Evans-Pritchard said.

"On balance, today’s data suggest that China’s economy remained strong at the start of 2017. But this strength remains heavily reliant on rapid investment growth that will be difficult to sustain given clear signals that the fiscal and monetary policy stance will be less supportive this year. As such, we continue to anticipate a slowdown in economic activity in the coming quarters."