Skip to content

China's Economy Surpasses Expectations Despite Global Slowdown

China experienced faster-than-expected economic growth in the first quarter, as lifting strict COVID restrictions allowed businesses and consumers to recover from the pandemic's disruptive effects. However, a global economic slowdown indicates a potentially uneven road ahead.

Beijing City
Beijing City

Q1 GDP Growth Outperforms Forecasts

The National Bureau of Statistics reported a 4.5% year-on-year GDP growth in the first three months of the year, surpassing the 2.9% growth in the previous quarter and beating analyst predictions of a 4.0% increase.

Investors Monitor Post-COVID Recovery

Investors have kept a close eye on first-quarter data, looking for signs of strength in the recovery after Beijing relaxed COVID restrictions in December and eased a three-year crackdown on tech firms and property.

China's Growth Target Remains Intact

Matt Simpson, a senior market analyst at City Index, stated that the Q1 figures keep China on track for its 5% growth target this year. However, there are concerns that the Q1 data represents an initial boost from reopening, and momentum may need to be faster in Q2 or Q3.

Uneven Recovery and Doubts About Demand

China's recovery has been uneven, with improvements in consumption, services, and infrastructure spending, but slowing prices and increasing bank savings raise concerns about demand.

Q1 Quarter-on-Quarter GDP Growth

On a quarter-on-quarter basis, GDP grew 2.2% in January-March, meeting analyst expectations and rising from a revised 0.6% increase in the previous quarter.

Chinese Policymakers Pledge Economic Support

Chinese policymakers have promised to increase support for the $18 trillion economy this year to control unemployment. However, concerns about debt risks and structural issues limit their options.

Central Bank's Stance on Liquidity and Growth

China's central bank would maintain ample liquidity, stabilize growth and jobs, and focus on expanding demand.

Predictions for 2023 Economic Growth

Analysts expect China's growth in 2023 to accelerate to 5.4%, up from 3.0% last year. The government has set a modest target of around 5% for this year after significantly missing the 2022 goal.

March Activity Data Shows Improving Retail Sales

Data released Tuesday showed retail sales growth accelerated to 10.6% in March, exceeding expectations and reaching a nearly two-year high. Factory output growth also increased but was slightly below expectations.

Fixed Asset Investment Slows Down

Fixed asset investment growth in January-March slowed to 5.1% year-on-year, below the expected 5.7% increase. It had grown 5.5% in the January-February period.

Concerns About Economic Recovery Strength

Wen Bin, the chief economist at China Minsheng Bank, noted that current market worries about deflation reflect concerns about the strength and sustainability of the economic recovery. While the production side has returned to pre-pandemic levels, demand-side momentum remains weak.