Chinese growth a nice surprise

China’s economy expanded far more than expected in the first quarter of 2024, data showed on Tuesday, but disappointing retail and industrial figures suggested leaders face severe headwinds to hit their annual growth target.

Beijing has set a goal of around 5 per cent for 2024, which officials have already admitted will “not be easy” and which analysts said was ambitious given the challenges the world’s second-largest economy is confronting.

For the first three months of the year, gross domestic product rose 5.3 per cent, compared with 5.2 in the previous quarter, the National Bureau of Statistics said.

The figures well exceeded analysts’ expectations, with those pooled by Bloomberg having forecast 4.8 per cent.

“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 economy, despite being eminently political.

Tuesday’s figures “beat the market expectation by a wide margin”, Dan Wang, chief economist at Hang Seng Bank China, said. “Consumption and housing investment (were) the main drag, while manufacturing and infrastructure were the main engines.”

It reflects “the fundamental policy shift from a focus on (the) consumer market and service sector to ... industrial growth”.

But woes in the property market remained a millstone for the economy as home prices continued to fall and top developers including Country Garden and Vanke sent out distress signals over their profits and challenges paying off debt.

Reflecting those difficulties, last month also saw a fall in property prices in China’s major cities, data showed.

Fears about a return to deflation are also looming.

Derek Scissors, a senior fellow at the American Enterprise Institute (AEI), warned that “the good news ends” with the real GDP figure, which is adjusted for inflation.

“Deflation is evident in GDP and in producer prices,” he said.