Data released on Tuesday revealed that, despite being battered by a crisis in the real estate industry and declining consumer spending, China’s economy expanded significantly faster than anticipated in the first quarter of 2024.
Beijing announced last month that it would “not be easy” to reach its objective of about five percent growth for the year. Given the challenges the country faces, observers believed this goal was ambitious.
According to the National Bureau of Statistics, the gross domestic product increased by 5.3 percent from January to March as opposed to 5.2 percent in the preceding quarter.
The figures well exceeded analysts’ expectations, with those pooled by Bloomberg having estimated the figure to come in at 4.8 percent.
“The national economy continued the good momentum of a rebound,” the NBS said, calling it a “good start”.
The GDP data remains a key insight into the health of the world’s second-largest economy, despite being eminently political.
And Tuesday’s figures “beat the market expectation by a wide margin”, Dan Wang, chief economist at Hang Seng Bank China, told AFP.
“Consumption and housing investment was the main drag, while manufacturing and infrastructure were the main engines,” she said.
It reflects “the fundamental policy shift from a focus on (the) consumer market and service sector to… industrial growth”, she added.
But as home prices continued to decline and leading developers, such as Country Garden and Vanke, put out distress signals over their earnings and difficulties paying off debt, the real estate market’s problems continue to be a millstone for the economy.
Ratings agency Fitch last week downgraded the country’s sovereign credit outlook to negative, warning of “increasing risks to China’s public finance outlook” as it contends with more “uncertain economic prospects”.
Policymakers have announced a series of targeted measures as well as the issuance of billions of dollars in sovereign bonds in order to boost infrastructure spending and spur consumption.
But analysts say much more needs to be done in the form of a “bazooka” stimulus.
Growth is also particularly hampered by sluggish confidence among households and businesses in the context of this economic uncertainty, which is hammering consumption.
However, other industries are doing well, most notably services, as consumers frequent eateries, transportation hubs, and tourism destinations.
However, officials reported that industrial output and retail sales, the primary gauge of consumer spending, also fell last month.
While industrial output increased by 4.5 percent in January and February of 2024, it had grown by 5.5 percent in the first two months of 2024. Retail sales, on the other hand, expanded by just 3.1 percent year over year.
Notably, from 5.3 percent in February to 5.2 percent in March, the jobless rate decreased.
However, because that number only includes workers in cities, it effectively leaves out millions of migratory laborers from rural areas, whose condition has been made worse by the housing problem and who are particularly vulnerable to the downturn.
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