Chinese economy in fast lane of recovery despite pandemic

China’s gross domestic product increased 18.3 percent year-on-year in the first quarter, the highest since the country started recording its quarterly growth. This is because of the recovery of demand as well as the low base of the first quarter last year due to the dormancy of the economy as a result of the novel coronavirus outbreak.

Compared with the first quarter of 2019, GDP has grown 10.3 percent. That is more than 5 percent annually on average over the past two years, proving that the economy is bidding farewell to the impacts of the COVID-19 pandemic.

That should serve to ease the concerns of structural issues such as overcapacity and the rise of the debt leverage ratio if demand could not recover in time to match the recovery of production.

The increase of investment in manufacturing industries rose 29.8 percent in the first quarter, faster than the growth of investment in infrastructure, which was 29.7 percent, and investment in the real estate market, which grew by 25.6 percent, indicating both government funds and market capital are actively playing their respective roles in the economy as expected.

In the first quarter, the total retail sales of consumer goods surged 33.9 percent year-on-year — the revenue of the catering industry rose 91.6 percent in March — showing the recovering potential of consumption.

Exports increased 38.7 percent in the first quarter. This is better than expected, showing the global recovery is gathering pace. The increasing external demand is likely to continue in the foreseeable future.

As such, consumption has contributed 11.6 percentage points of the 18.3 percent GDP growth in the first quarter, with investment and net exports contributing 4.5 percentage points and 2.2 percentage points respectively. It is projected that more than half of the economic growth will come from consumption this year. But although the role of investment will become smaller in boosting growth, it remains crucial as more money is flowing to high-tech industries and the service sector.

China’s growth this year is likely to be markedly higher than the “above 6 percent” target. The rising domestic demand will become an important impetus driving growth this year, and industrial upgrading and economic restructuring will continue amid uncertainties, which will be caused mainly by the lingering pandemic, fast-changing geopolitical situations, imported inflation and rising debt leverage ratios.