China’s economic growth is optimistic after the country has set a target 5 per cent growth for 2023 and is on track to hit it, according to the recent numbers.
However, concerns remain about whether the country’s recovery will be comprehensive or sustainable, even with strong consumer demand
China reported that its economy expanded in the first quarter of this year, performing better than expected. But global markets had a largely muted response as the strength of the country’s rebound remains uncertain.
The world’s second-largest economy released an abundance of economic data on April 18 that shows it’s on a path to recovery, fueled by a rise in consumer appetite, after scrapping its zero-COVID policy in December.
China’s GDP grew by 4.5 per cent in the first quarter compared to the previous year, according to the National Bureau of Statistics (NBS), while March retail sales climbed 10.6% versus last year, beating expectations.
Not all numbers were positive, though. Youth unemployment rose for the third straight month, approaching nearly 20 per cent for 16- to 24-year-olds. Industrial output last month grew by 3.9 per cent compared to 2022, falling just short of forecasts, as did fixed-asset investment, which grew 5.1 per cent. Property investment, meanwhile, shrank 5.8 per cent.
The uneven results partly explain the restrained, if positive, reaction to China’s growth in the first quarter. Analysts and traders are still waiting to see if its recovery will carry into the second half of 2023, given that first-quarter results may reflect pent-up demand following years of strict covid rules.
Analysts have noted that low base effects—comparing present activity to depressed numbers from last year’s covid lockdown—can explain some of the “eye-catching” figures in this data release.
“While the recovery is on track, I don’t think economic growth from what we have seen so far is exceeding expectations too much,” said David Chao, global market strategist at Invesco Asia Pacific, to Reuters.
On April 13, the NBS reported an unexpected 14.8 per cent boom in Chinese exports during March, largely driven by the sale of electric cars, but analysts partly attributed that number to a backlog of orders due to pandemic restrictions.