2024-04-16 06:15:07
On April 15, China’s National Bureau of Statistics announced that its gross domestic product (GDP) for the first quarter increased by 5.3% from the same period last year, exceeding market expectations. The photo shows Beijing’s business district during the morning commute. Photographed in February (2024 Reuters/Florence Lo)
[北京 １６日 ロイター] – China’s National Bureau of Statistics announced on the 16th that the gross domestic product (GDP) for the first quarter increased by 5.3% from the same period last year, exceeding market expectations. This will likely come as a relief to authorities, who have been implementing measures to support the economy amid persistent real estate and local debt problems.
However, a series of March indicators released at the same time as the GDP data, including industrial production and retail sales, showed that weak domestic demand was holding back overall economic growth.See more
Market estimates compiled by Reuters were for a 4.6% increase. The growth rate accelerated slightly from 5.2% in the previous quarter.
The increase was 1.6% compared to the previous quarter, which also exceeded market expectations of a 1.4% increase.
The Chinese government has set a growth target of around 5% for all of 2024, but analysts view this as ambitious.
Jeff Ng, head of Asia macro strategy at SMBC (Singapore), said, “This is a positive statement in helping us achieve our growth targets.” He added: “I think sentiment is still bearish. We’ll probably see some movement in the opposite direction starting in the fourth quarter.”
“The strong growth rate in the first quarter will go a long way towards achieving China’s annual target of around 5%,” said Harry Murphy Crews, an economist at Moody’s Analytics.
Industrial production also supported the economy throughout the quarter, he said, but added, “The weak data in March is a cause for concern. The weakness in household spending is a concern as well.”
The economic recovery after the coronavirus outbreak has been slow due to the real estate recession, rising local debt, and weak private consumption. The year got off to a strong start, but data on exports, consumer prices and bank lending in March showed the economy may stall again.
Indicators released that day also showed that domestic demand continues to be sluggish.
Industrial production rose 4.5% in March from a year earlier, slowing from a 7.0% increase in January-February. This was lower than the 6.0% increase expected by the market compiled by Reuters.
Retail sales rose 3.1% in March. Sales rose 5.5% in January-February, compared to market expectations of 4.6%.
Fixed asset investment in the January-March period increased by 4.5% from the previous year. Sales rose 4.2% in January-February, compared to market expectations of 4.1%.
“On the surface, the headline numbers look good, but we actually think the momentum is quite weak,” said Alvin Tan, head of Asian currency strategy at RBC Capital Markets.
Following the first quarter GDP data, ANZ economists raised their 2024 growth forecast for China to 4.9% from 4.2%, but BBVA left it unchanged at 4.8%.
Many investors appear to be unwilling to accept the better-than-expected GDP figures after March’s weak data.
March’s indicators highlighted the depth of the real estate sector’s problems as investor sentiment and demand remain weak.
New home prices fell 2.2% in March from a year earlier, the steepest decline since August 2015, according to Reuters calculations based on Office for National Statistics data.See more
Real estate investment in March decreased by 16.8% from the previous year. The decline widened from the 9.0% decline in the January-February period. Real estate sales also fell 23.7%, accelerating the pace of decline from the 20.5% decline in the January-February period.
Some analysts say authorities face challenges as more credit flows to production than consumption, exposing structural flaws in the economy and reducing the effectiveness of monetary policy tools.
Jinyue Dong, senior economist at BBVA Research, commented: “The economic recovery has not yet gained a solid foundation as the deep correction in the real estate market and local government debt problems remain the main risks.”
“Furthermore, geopolitical risks, mainly due to the US-China conflict ahead of the US presidential election, are expected to continue for the time being.”
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