By Kevin Yao and Joe Cash
BEIJING (RockedBuzz via Reuters) – China’s economy grew at a faster-than-expected pace in the first quarter as the end of strict COVID limits lifted businesses and consumers from crippling pandemic disruptions, albeit headwinds from a global slowdown they point to a rough path in sight.
More than a year of global monetary policy tightening to curb searing inflation has dented global economic growth, leaving many countries, including China, dependent on domestic demand to boost momentum and heighten the challenge for stability-seeking policymakers post-COVID .
Gross domestic product grew 4.5% year over year in the first three months of the year, data from the National Bureau of Statistics (NBS) showed Tuesday, faster than the previous quarter’s 2.9%. It beat analysts’ forecasts for a 4.0% expansion and marked the strongest growth in a year.
CHART: China’s Economy Grows Fastest in One Year in Q1, https://www.ceiving.com/graphics/CHINA-ECONOMY/GDP/mypmojrqlpr/chart.png
Investors have been watching Q1 data closely to gauge the strength of the recovery after Beijing abruptly lifted COVID curbs in December and eased a three-year crackdown on tech companies and properties. GDP growth last year plummeted to one of the worst in nearly half a century due to COVID-related restrictions.
“The economic recovery is on track. The bright spot is consumption, which is strengthening as household confidence improves,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “Strong export growth in March also likely helped boost GDP growth in the first quarter.”
Chinese policymakers pledged to boost support to $18 trillion economy to keep unemployment in check, but have limited leeway as businesses grapple with debt risks, structural problems and global recession fears .
China’s rebound has so far been uneven as its past investment-fueled growth to now become dependent on consumption faces challenges.
Spending on consumption, services and infrastructure has increased, but industrial production has lagged on weak global growth, while slowing prices and rising bank savings are raising questions about demand.
Chinese exports rose unexpectedly in March, but analysts warned that the improvement partly reflects suppliers catching up with backorders following COVID-19 disruptions.
NBS spokesman Fu Linghui told a news conference that while it has been a good start for the economy, “the international environment is still complex and ever-changing, the limits of insufficient domestic demand are clear, and the foundations for economic recovery are not solid”.
China’s second-quarter growth could pick up sharply due to a low base effect a year ago, Fu said.
On a quarterly basis, GDP grew 2.2% in the January-March period, meeting analyst expectations and up from a revised increase of 0.6% in the previous quarter.
Asian stocks weakened as a brief post-data rally was eclipsed by signs that a full recovery in China was still some way off. China’s bluechip CSI300 index rose just 0.3%.
MODEST GROWTH GOAL
Analysts polled by RockedBuzz via Reuters expect China’s growth in 2023 to accelerate to 5.4%, from 3.0% last year.
The government has set a modest GDP growth target of around 5% for this year, after seriously missing its 2022 target.
Separate data on March activity on Tuesday showed retail sales growth accelerated to 10.6%, beating expectations and nearing two-year highs. But that was driven by a low base effect and there are signs of caution among consumers.
Industrial production growth also picked up, but was just below expectations.
“Riding on this trend, we expect second-quarter GDP to hit around 8% and it won’t be a big deal for China to meet its growth target for the year,” said Tao Chuan, chief macro analyst at Soochow Securities. . in Beijing.
“That said, we see some structural issues remain in the unemployment rate, property investment and private sector confidence. These issues need to be resolved to sustain a sustained recovery.”
China’s national unemployment rate based on surveys fell to 5.3% in March from 5.6% in February, but the unemployment rate for people aged 16-24 rebounded to 19.6% on last month from 18.1% in February.
GRAPH: China’s Youth Unemployment Rate Nears Record, https://www.ceiving.com/graphics/CHINA-ECONOMY/JOBS/znvnbjgndvl/chart.png
China’s infrastructure investment rose 8.8% in January-March year-on-year, outpacing the 5.1% increase in overall fixed asset investment, while real estate investment fell 5.8%.
POLITICAL SUPPORT
The nation’s central bank, which cut lenders’ reserve requirement ratios in March, said last week it would maintain ample liquidity, stabilize growth and employment.
The central bank on Monday extended liquidity support to banks through its medium-term loan facility but kept the rate on such loans unchanged, an indication that Beijing is not overly concerned about immediate growth prospects.
The government, which has refrained from taking big steps to stimulate consumption, still relies heavily on infrastructure spending to stimulate investment and economic growth.
“In short, with this GDP report, we believe there is no immediate need for the government to give a massive stimulus to the economy,” Iris Pang, chief economist for Greater China at ING, said in a statement. ($1 = 6.8761 Chinese Yuan)
(Additional reporting by Ellen Zhang and Liangping Gao; Editing by Sam Holmes and Shri Navaratnam)
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