With a growth of 5.3 percent in the first quarter, the Chinese economy exceeds expectations, reports The Financial Times. However, demand remains weak, which is a cause for concern.
China’s gross domestic product (GDP) comfortably exceeds expectations with growth of 5.3 percent in the first quarter compared to last year. Data from the National Bureau of Statistics shows that growth was significantly higher than Reuters analyst expectations of 4.6 percent and slightly faster than the 5.2 percent growth in the previous three months.
That provided some relief, as mixed economic figures have been reported in recent weeks. Beijing is trying to support growth in the face of a persistently weak real estate sector and rising local government debt. “Overall, the national economy got off to a good start in the first quarter, (…) which lays a good foundation (…) for the whole year,” The Financial Times quotes the National Bureau of Statistics. At the same time, it sounds that “the external environment is becoming more complex, serious and uncertain, and the basis for economic stability (…) is not yet solid.”
Despite this good start, momentum could falter again, according to March figures on exports, consumer inflation, producer prices and bank lending. Separate data on factory production and retail sales released alongside the GDP report underline that domestic demand remains weak and momentum is slowing. The government has unveiled a series of fiscal and monetary policy measures in a bid to achieve what analysts described as an “ambitious GDP growth target” of around 5 percent for 2024. The analysts noted that last year’s 5.2 percent growth was likely to be embellished by a post-Covid recovery in 2022.
Some concern
“The strong growth rate in the first quarter is a major contributor to China’s target of around five percent for this year,” Harry Murphy Cruise, economist at Moody’s Analytics, told Reuters. “Industrial production was also supportive throughout the quarter, but weak data for March is cause for some concern. Chinese households are also keeping their wallets closed.”
The world’s second-largest economy is struggling to achieve a strong and sustainable recovery from the Covid crisis. It is suffering from a persistent slump in the real estate sector, rising local government debt and weak private sector spending. Last week, credit rating agency Fitch lowered its outlook on China’s creditworthiness to negative. Reason: the risks to public finances as Beijing channels more spending into infrastructure and high-tech production. Infrastructure works are a common playbook to help revive the economy when consumers are wary and businesses lack confidence. “On the face of it, the number looks good, but I think the momentum is ultimately quite weak,” concluded Alvin Tan, of RBC Capital Markets in Singapore.
