Business
China’s economy rises faster than expected, global headwinds raise challenges
China’s economy grew at a faster-than-expected pace in the first quarter, as the end of strict COVID-19 curbs lifted businesses and consumers out of crippling pandemic disruptions, although headwinds from a global slowdown point to a bumpy ride ahead.
More than a year-long sweeping streak of global monetary policy tightening to rein in red hot inflation has dented world economic growth, leaving many countries including China reliant on domestic demand to spur momentum and raising the challenge for policymakers looking for post COVID-19 stability.
For the latest headlines, follow our Google News channel online or via the app.
Gross domestic product grew 4.5 percent year-on-year in the first three months of the year, data from the National Bureau of Statistics (NBS) showed on Tuesday, faster than the 2.9 percent in the previous quarter. It beat analyst forecasts for a 4.0 percent expansion and marked the strongest growth in a year.
Investors have been closely watching first quarter data to assess the strength of the recovery after Beijing abruptly lifted COVID-19 curbs in December and eased a three-year crackdown on tech firms and property. GDP growth last year slumped to one of its worst in nearly half a century due to COVID-19 restrictions.
“Economic recovery is well on track. The bright spot is consumption, which is strengthening as household confidence
improves,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “The strong export growth in March also likely helped to boost GDP growth in Q1.”
Chinese policymakers have pledged to step up support for the $18 trillion economy to keep a lid on unemployment, but they face limited room to manoeuver as businesses grapple with debt risks, structural woes, and global recession worries.
China’s rebound has so far remained uneven as its investment-fueled growth of the past to one now reliant on consumption faces challenges.
Consumption, services, and infrastructure spending have perked up but factory output has lagged in the face of weak
global growth, while slowing prices and surging bank savings are raising doubts about demand.
China’s exports unexpectedly surged in March, but analysts cautioned the improvement partly reflects suppliers catching up with unfulfilled orders after the COVID-19 disruptions.
NBS spokesman Fu Linghui told a news conference that while it was a good start for the economy, “the international environment is still complex and ever-changing, constraints from insufficient domestic demand are obvious and the foundation for economic recovery is not solid.”
China’s second-quarter growth could pick up sharply due to the year-ago low base effect, Fu said.
On a quarter-on-quarter basis, GDP grew 2.2 percent in January-March, meeting analyst expectations and up from a
revised 0.6 percent rise in the previous quarter.
Asian shares pared losses after the data, though momentum was capped by the underlying challenges facing China’s economy. China’s bluechip CSI300 Index was up just 0.1 percent.
Modest growth target
Analysts polled by Reuters expect China’s growth in 2023 to speed up to 5.4 percent percent, from 3.0 percent percent last year.
The government has set a modest target for economic growth of around 5 percent for this year, after badly missing the 2022 goal.
Separate data on March activity on Tuesday showed retail sales growth quickened to 10.6 percent, beating expectations and hitting near two-year highs. But that was led by a low-base effect and there are signs of caution among consumers.
Factory output growth also sped up but was just below expectations.
“Riding on this trend, we expect GDP in the second quarter to reach around 8 percent, and it won’t be a big problem for China to achieve its growth target for the year,” said Tao Chuan, chief macro analyst at Soochow Securities in Beijing.
“That said, we see some structural problems remain in unemployment rate, property investment and confidence in private
sector. These problems need to be solved to support a sustained recovery.”
China’s nationwide survey-based jobless rate fell to 5.3 percent in March from 5.6 percent in February, but the jobless rate for those aged16 to 24 rebounded to 19.6 percent last month from 18.1 percent in February.
China’s infrastructure investment rose 8.8 percent in January-March year-on-year — outpacing a 5.1 rise in overall fixed-asset investment, while property investment fell 5.8 percent.
Policy support
The nation’s central bank, which cut lenders’ reserve requirement ratio in March, said last week it will maintain ample liquidity, stabilize growth and jobs.
On Monday, the central bank extended liquidity support to banks through its medium-term lending facility but kept the rate
on such loans unchanged, an indication Beijing isn’t overly concerned about the immediate growth outlook.
The government, which has refrained from taking big steps to spur consumption, is still relying heavily on infrastructure
spending to spur investment and economic growth.
“In short, with this GDP report, we believe there is no immediate need for the government to put massive stimulus into
the economy,” Iris Pang, chief Greater China economist at ING, said in a note.
Read more:
IMF says China, India to drive about half of 2023 global growth