Economists: Q1 GDP likely up 5%

China’s economy is likely to have expanded by around 5 percent yearon-year in the first quarter on better-than-expected indicators such as exports and industrial production, pointing to a continued economic recovery trend throughout the year, economists said.

“The Chinese economy is displaying more signs of recovery, surpassing expectations in the first two months of the year, led by the notable growth in exports and manufacturing,” Robin Xing, chief China economist at Morgan Stanley, said on Monday.

“I anticipate that the first-quarter year-on-year GDP growth rate will reach 5 percent, with a further acceleration expected in the second quarter.”

Xing’s remarks came as the market is eagerly awaiting the release of first-quarter macroeconomic indicators by the National Bureau of Statistics on Tuesday.

Morgan Stanley recently revised China’s 2024 real GDP forecast up from 4.2 percent to 4.8 percent, given the country’s stronger-than-expected exports and manufacturing capex.

Two-thirds of the upward revision stems from stronger-than-expected exports, driven by resilient US demand and robust export volume amid soft prices. And the rest of the upward revision is due to manufacturing capex as the country doubles down on supply chain upgrades, with a focus on energy efficiency and digitalization, Morgan Stanley said in a report.

Xing said exports will remain a primary positive factor for China’s growth in 2024 given the rebound in global demand, especially stronger US demand. “I estimate that exports may grow by 5 to 10 percent this year.”

Despite the notable improvement in some key indicators, Xing warned that the broader economy is still facing pressure from insufficient domestic demand, lackluster consumer sentiment and weakness in the property sector, highlighting the need for more policy stimulus to bolster the world’s second-largest economy.

“It is advisable for policymakers to increase fiscal spending in fields such as healthcare, education and the social security system, which will help restore consumer confidence and further unleash their consumption potential,” he said. “More efforts should also be made to continuously deepen reforms to boost confidence among businesses.”

Data released on Friday by the General Administration of Customs showed China’s foreign trade grew by 5 percent year-on-year to 10.17 trillion yuan ($1.41 trillion) in the first quarter. The country’s exports grew by 4.9 percent year-on-year to 5.74 trillion yuan, while imports rose 5 percent on a yearly basis to 4.43 trillion yuan.

Given China’s better-than-expected performance at the beginning of the year, the Asian Development Bank has also revised its growth forecast upward for China to 4.8 percent in 2024, 0.3 percentage point higher than the previous estimate.

“An improved labor market and household income will support consumption,” said Akiko Terada-Hagiwara, head of the economics and strategy unit of the ADB resident mission in China. “On the investment side, we expect support from fiscal policy will drive the growth of investment.”