- China’s growth has drawn attention as it reopens after nearly three years of ending strict Covid restrictions.
- China’s National Bureau of Statistics said Tuesday that gross domestic product grew 4.5% in the first quarter.
- That was higher than the 4% forecast in a Reuters poll of economists and marked the highest growth since the first quarter of last year. The economy grew by 2.2% in the quarter.
Pedestrians cross a road in Shanghai, China, on Tuesday, February 28, 2023.
Bloomberg | Bloomberg | Good pictures
China’s first-quarter gross domestic product rose sharply as central banks raised rates to control inflation.
China’s National Bureau of Statistics said Tuesday that gross domestic product grew 4.5% in the first quarter. That was higher than the 4% forecast in a Reuters poll of economists and marked the highest growth since the first quarter of last year. The economy grew by 2.2% in the quarter.
Retail sales rose 10.6% in March, beating expectations for 7.4% growth, while industrial production rose 3.9%, slightly below Reuters forecasts of 4%.
Year-to-date fixed asset investment rose 5.1% from a year ago, below estimates for 5.7% growth.
The economy expanded 2.9% in the fourth quarter of 2022.
China’s growth has drawn attention as it reopens after nearly three years of ending strict Covid restrictions.
The economy grew by 3% in 2022, ahead of Beijing’s official target of 5.5% set in March last year. For 2023, the government last month set a moderate growth target of “around 5%”.
But economists have warned that China’s economic recovery will take longer than expected – with Citi pushing back its target for the Hong Kong index by three months.
While most analysts polled by Reuters expect no change in the central bank’s benchmark lending rate, some believe the People’s Bank of China may cut its one-year lending prime rate somewhat if China’s inflation slows further.
China’s consumer inflation fell to an 18-month low earlier this month.
Ahead of the release, Iris Pang, ING’s chief China economist, predicted China’s first-quarter gross domestic product would “fall short” of the government’s growth target for the full year as external factors eased.
“Slowing growth in external demand…will weigh on exports and manufacturing activity,” Bong wrote in a note ahead of the GDP report.
Exports from China unexpectedly rebounded in March, marking a surprise rise of 14.8% after a 6.8% decline in the previous month. The US also saw a trade surplus of $88 billion, beating expectations for a $39 billion surplus.
Bang added that services could become a “growth engine” for China’s economy, pointing to the strong activity seen in recent data. The Caixin Services Purchasing Managers’ Index rose to 57.8 in March, the highest reading in more than two years.
Pang also said he expects the Chinese government to release additional stimulus to boost its infrastructure investments and consumption following the GDP report.
“To keep the 5% growth target for 2023, the government needs to push ahead with infrastructure investments, most of which are to build metro lines and increase the number of 5G towers, as these are already in the plan for this year,” he wrote. A note before the GDP report.
“Therefore, we expect GDP to grow faster at 6.0% YoY in the second quarter. As external demand should be a concern for the year, we keep the full-year GDP forecast at 5%,” Pang wrote.
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