China’s gross domestic product expanded 4.5 per cent year on year in the first quarter, as strong growth in exports and infrastructure investment as well as a rebound in retail consumption and property prices drove a recovery in the world’s second-largest economy.
The official figure, which exceeded analyst expectations of a 4 per cent rise, followed efforts by Chinese leader Xi Jinping’s government to restore business confidence damaged by pandemic controls last year and abrupt policy changes.
The January-March growth rate was still short of the government’s full-year target of 5 per cent, held back by a nationwide Covid-19 outbreak at the start of this year, but economists expect it to pick up pace as the year progresses.
Xi, who formally embarked on an unprecedented third term as China’s president last month, is keen to revive economic growth. Gross domestic product expanded just 3 per cent last year, missing the official target of 5.5 per cent which was already the lowest in decades.
“Definitely, the recovery’s on track,” said Tao Wang, UBS chief China economist. “The momentum at the beginning of the year was stronger than expected.”
China’s rebound is crucial to global economic growth this year as developed nations grapple with persistently high inflation, rising interest rates and sluggish expansion in the wake of the pandemic and Russia’s full-scale invasion of Ukraine.
“The national economy showed a steady recovery and made a good start,” China’s National Bureau of Statistics said. But the agency cautioned the situation was “complex and volatile, inadequate domestic demand remains prominent and the foundation for economic recovery is not solid yet”.
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Chinese commodities markets rallied following Tuesday’s data release, but equities failed to hold on to early gains.
China abandoned zero-Covid restrictions in December amid popular opposition to the rolling lockdowns that paralysed cities across the country for most of the year. The easing unleashed pent-up demand in the retail sector, where sales rose 5.8 per cent year on year in the first quarter and 10.6 per cent in March. But the base of comparison with last year was low, given that Shanghai started a months-long lockdown in March 2022.
Premier Li Qiang, Xi’s new number two, signalled at China’s rubber-stamp parliament last month that the government would relax a crackdown on business that has wiped billions of dollars from property developers and internet platforms.
Manufacturing investment rose 7 per cent year on year in the first quarter and industrial output gained 3 per cent. Exports showed strong growth, up 8.4 per cent in the first quarter, and state-led infrastructure investment climbed 8.8 per cent, while overall fixed asset investment rose 5.1 per cent. Private investment was weak, up just 0.6 per cent, suggesting a decline in March.
The property sector’s woes continued, with new housing starts tumbling 19.2 per cent year on year in the first quarter. Home sales by area declined 1.8 per cent but sales by value rose 4.1 per cent, pointing to a nascent recovery in prices. In March, new home prices rose at their fastest pace in 21 months.
The jobless rate fell to 5.3 per cent in March from 5.6 per cent in February, but youth unemployment hit the second-highest mark on record, at 19.6 per cent.
Economists said momentum would pick up in the second quarter, helped by the low base effect, but warned that consumption and property might struggle to maintain strong growth, while exports could be threatened by weaker developed markets.
Xi’s administration also remained hamstrung by a lack of credibility after hobbling the private sector, experts said.
Keyu Jin, a professor at the London School of Economics and author of The New China Playbook, said the biggest obstacle was the gap in private sector demand, both in consumption and investment.
“It will take time for confidence to come back to the Chinese economy,” she said.
Additional reporting by Hudson Lockett in Hong Kong
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