* GDP grows fastest in 6 quarters on factory output, retail
* Record March steel output shows reliance on old economy
* Analysts see growth fading later in year as govt eyes
* Clampdown on heated property prices could also brake GDP
(adds activity and property data, detail)
By Kevin Yao
BEIJING, April 17 China's economy grew 6.9
percent in the first quarter from a year earlier, slightly
faster than expected, supported by a government infrastructure
spending spree and a frenzied housing market that is showing
signs of overheating.
Analysts polled by Reuters had expected the economy to
expand 6.8 percent in the first quarter, the same pace as in the
fourth quarter of 2016.
First-quarter growth was the fastest since the third quarter
of 2015, with March data showing investment, retail sales,
factory output and exports all grew faster than expected.
The strong reading should help underpin wobbly global
financial markets but adds to worries that China's government is
still relying too heavily on stimulus and "old economy" growth
drivers and is not doing enough to tackle risks from an
explosive build-up in debt.
While China's data has been largely upbeat so far this year,
many analysts widely expect the world's second-largest economy
to lose steam later in the year as the impact of earlier
stimulus measures starts to fade and as local authorities step
up their battle to rein in hot housing prices.
Real estate investment growth accelerated to 9.1 percent in
the first quarter from a year earlier, as the pace of new
construction starts quickened despite intensified government
Though policymakers have pledged repeatedly to push reforms
to head off financial risks and asset bubbles, the government is
seeking to keep the world's second-largest economy on an even
keel ahead of a major leadership transition later this year.
The government is aiming for growth of around 6.5 percent in
2017, slightly lower than last year's target of 6.5-7 percent
and the actual 6.7 percent, which was the weakest pace in 26
Economic data was up across the board in March, with factory
output increasing at the fastest pace since December 2014 and
firms stepping up capital investments after a slowdown last
Industrial output rose 7.6 percent in March, with steel
output the highest on record, according to Reuters data, adding
to evidence of a global manufacturing revival that is buoying
prices of industrial materials from iron ore to coking coal.
But consumption also appears to be picking up, contributing
to 77.2 percent of first-quarter growth, while retail sales
growth picked up to 10.9 percent after slowing in the first two
months of the year.
Still, many analysts expect economic growth to cool later
this year as the impact of earlier stimulus measures starts to
fade and as local authorities resort to ever-tougher measures in
a bid to get soaring home prices under control.
Beijing also is continuing to rely heavily on new credit to
generate growth as productivity slows, despite worries about
China's banks extended the third highest loans on record in
the first quarter, though March lending was less than expected.
At the same time, China's central bank has shifted to a
tightening bias, and is using more targeted measures to contain
risks in the financial system, after years of ultra-loose
It has raised short-term interest rates several times
already this year, and further modest hikes are expected as it
tries to coax debt-laden firms to reduce leverage.
(Reporting by Kevin Yao; Writing by Elias Glenn; Editing by Kim