China’s gross domestic product grew by 4.5 percent year-over-year in the first quarter, beating earlier estimates of four percent growth.
The country’s National Bureau of Statistics reported the data on Tuesday local time. The growth was significantly higher than the 2.9 percent achieved in the last quarter of 2022. On a quarter-over-quarter basis, China’s economy grew by 2.2 percent.
Pinpoint Asset Management chief economist Zhiwei Zhang noted that consumption was the “bright spot” in China’s economic recovery, saying household confidence had improved significantly. Zhang said strong export growth from last month also likely propped the GDP in the first quarter.
“Economic recovery is well on track. The bright spot is consumption, which is strengthening as household confidence improves.”
Zhiwei Zhang, Chief Economist at Pinpoint Asset Management
Beijing has set a “modest” growth target of “around” five percent this year, lower than the 5.5 percent annual growth target set in 2022. The country fell short of achieving its target last year by only posting a three percent growth. Analysts, however, predicted that China could exceed this year’s target.
Goldman Sachs forecast that China’s economy would post a six percent full-year growth. The bank’s chief China economist, Hui Shan, said the country’s reopening after the COVID-19 pandemic would significantly boost its growth.
The Chinese government will likely boost the economy with stimulus later this year, according to NF Trinity managing director Helen Zhu. Zhu said the GDP could even exceed the five percent target in the second quarter.
Like Zhu, ING chief China economist Iris Pang also expects the Xi administration to roll out additional stimulus to further boost the infrastructure and consumption. She highlighted the importance of investing in infrastructure, especially building metro lines and adding more 5G towers across the nation.
In addition to possible government stimulus, Chinese authorities have taken other measures to prop up the economy. Earlier this week, the nation’s central bank rolled out liquidity support to commercial banks through its mid-term lending facility. Analysts said that the fixed-rate loans indicated that Beijing was not “overly concerned” about immediate growth at the moment.
China’s GDP has been under global scrutiny since the nation decided to reopen after implementing strict COVID-19 restrictions for almost three years. Some did not think China could recover at a fast rate. Zhu argued the recent Q1 data pushed back against those “skeptics.”
“The numbers are undoubtedly much stronger than anyone anticipated, and I think it’s a really good start to the year,” Zhu said.
Recovery remains uneven
Despite the favorable economic data, experts cautioned that China’s economic recovery remained uneven. Analysts explained that investment fuelled China’s growth before the pandemic, but the country had become more reliant on consumption.
Overall fixed asset investment grew by 5.1 percent year-over-year in Q1. The infrastructure investment rose by 8.8 percent, but the significant increase was countered by the 5.8 percent decline in property investment.
According to data, China’s factory output sped up in recent months but is still below target. It increased the risk of the market failing to meet consumer demands. At the same time, slowing prices and increased bank savings indicated that high consumer demand might decline in the future.
China’s exports unexpectedly increased last month, but analysts said it might show that suppliers were catching up with unfulfilled demand after the pandemic. Analysts explained that the global market was “complex and ever-changing” and weak international demand for China’s products could slow down its recovery.
Soochow Securities chief macro analyst Tao Chuan also pointed out that there were some structural problems in the unemployment rate as well. A nationwide survey revealed that the jobless rate fell to 5.3 percent in March from 5.6 percent the month before. However, the unemployment rate of young adults aged 16 to 24 rose 19.6 percent from 18.1 percent in February.