Photographer: Qilai Shen/Bloomberg

Five Things to Watch in China’s GDP Report

  • Labor market update will include job seeker-to-vacancy ratio
  • Property investment data to show how much new curbs are biting

China has defied the skeptics once more, weathering stock market wobbles and a weakening currency and shaking off a deflationary scare to post 2016 growth that’s almost certain to land smack in the middle of the government’s target range.

Fourth quarter and full-year gross domestic product data will be released Friday at 10 a.m. in Beijing, which will be 9 p.m. Thursday on Wall Street. The expansion remained 6.7 percent for a fourth-straight quarter, according to a Bloomberg survey of economists as of Tuesday. That annual pace would be the slowest since 1990, but still among the fastest in the world.

The stabilization has come at a cost as cheap credit fueled property bubbles in major cities, spurring policy makers to question whether such rapid growth is worth the risk. As the statistics bureau closes the books on 2016, here are some key themes to watch out for:

Property Investment

Soaring big-city property prices in the first three quarters started moderating in the final three months of the year as authorities rolled out tightening measures to reduce speculation.

The latest data on completed property investment will show whether those curbs are slowing development, which may weigh on economic growth. While housing turnover fattens realtor paychecks and aids the services sector, construction plays an outsize role in the economy with its demand for workers and raw materials such as concrete, glass and steel.

State Enterprises

The economy’s stabilization in 2016 has been underpinned by government spending on everything from shantytown upgrades to new pipeline networks. Private investment growth, however, declined from recent historic highs before stabilizing in August.

A further rebound of private fixed-asset investment would be a good sign for economic momentum, signaling companies are buying into the brighter outlook. Also notable will be whether bloated, inefficient state-owned companies keep outpacing private ones by such wide margins -- a trend which somewhat undercuts plans to move to a more market-driven economic model.

Reflation

A read of economy-wide inflation should show the return of pricing power for companies and an accompanying decline in real borrowing costs. The GDP deflator -- the difference between the headline growth rate (adjusted for inflation) and the nominal growth rate (unadjusted for inflation) -- usually falls somewhere between the producer price index, which rose at the fastest pace in more than five years in December, and the consumer price index.

With economists dialing back forecasts for additional monetary stimulus -- and some seeing a move to tightening in coming months -- a swift pickup in inflation expectations could shift the consensus on where policy is headed.

Another wrinkle: China is going through a once-in-a-lifetime rebalancing toward growth led by services, which made up more than half of output in 2015 for the first time. That might remain the case for 2016, but take out inflation and the story changes.

At constant prices that strip out inflation or deflation, services increased slightly to about 45 percent of GDP in 2015 from 44 percent in 2010, statistics bureau data show. Manufacturing hovered around 46 percent to 47 percent over the same period. In that sense, rebalancing may have more to do with inflation than anything else.

Overcapacity Cut

Cutting excess capacity in sectors like coal and steel has been a main goal of policy makers. Friday’s data will include detail on which industries did or didn’t make progress, and could include a briefing by Ning Jizhe, who’s in two key roles as head of the National Statistics Bureau and deputy chairman of the National Development and Reform Commission, the top economic planning body. With the headline GDP numbers so stable, it could be what is said in text rather than numbers that proves to be most interesting to China economy watchers.

Labor Market

The government is expected to also publish a labor market report sometime Friday showing the ratio of job seekers to vacancies, with breakdowns of hiring across regions and industries. Reports may also show a deceleration in the rapid income growth that’s helped underpin the transformation to more consumer-led growth. A faltering of the upward momentum of per capita disposable income growth may add to the economy’s challenges this year if consumers start keeping a closer grip on their wallets.

— With assistance by Miao Han

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