China’s economic growth tops forecasts on policy support
BEIJING (Reuters) — China’s economy grew faster than expected in the first quarter, data showed Tuesday, offering some relief to officials as they try to shore up growth in the face of protracted weakness in the property sector and mounting local government debt.
The government has unveiled fiscal and monetary policy measures in a bid to achieve what analysts have described as an ambitious 2024 GDP growth target of around 5 percent, noting that last year’s growth rate of 5.2 percent was likely flattered by a rebound from COVID-hit 2022.
Gross domestic product grew 5.3 percent in January-March from the year earlier, data released by the National Bureau of Statistics showed, comfortably above analysts’ expectations in a Reuters poll for a 4.6 percent increase and slightly faster than the 5.2 percent expansion in the previous three months.
“The result is positive for the economy to hit its target. Momentum appears to be stable for now, evidenced by the March data not surprising on the upside,” said Jeff Ng, head of Asia macro strategy at SMBC in Singapore “I think sentiments are still leaning bearish. I’m anticipating some reversal, possibly from the last quarter of 2024.”
On a quarter-by-quarter basis, GDP grew 1.6 percent in the first quarter, above the forecast for growth of 1.4 percent.
The world’s second-largest economy has struggled to mount a strong and sustainable postCOVID-19 bounce, burdened by a continued property downturn, mounting local government debts and weak private sector spending.
Fitch cut its outlook on China’s sovereign credit rating to negative last week, citing risks to public finances as Beijing channels more spending toward infrastructure and high-tech manufacturing, amid a shift away from the property sector.
The government is drawing on infrastructure work — a wellused playbook — to help lift the economy as consumers are wary of spending and businesses lack confidence to expand.
China’s consumer inflation cooled more than expected in March, while producer price deflation persisted, pointing to subdued domestic demand and reinforcing market calls for more stimulus to spur demand.
The economy was off to a solid start this year, but March data on exports, consumer inflation and bank lending showed that momentum could falter again.
Separate data on factory output and retail sales, released alongside the GDP report, also showed momentum is slowing.
Industrial output in March grew 4.5 percent from a year earlier, compared with a forecast increase of 6.0 percent and a gain of 7.0 percent for the January-February period.
Growth of retail sales, a gauge of consumption, rose 3.1 percent year-on-year in March, against a forecast increase of 4.6 percent and slowing from a 5.5 percent increase in the January-February period.
Fixed asset investment grew an annual 4.5 percent over the first three months of 2024, versus expectations for a 4.1 percent rise. It expanded 4.2 percent in the January-February period.
“On the face of it, the headline number looks good ... but I think the momentum is actually quite weak at the end,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets in Singapore.
The crisis in the property sector has been a major drag on China’s economy as it has rippled across business and consumer confidence, investment plans, hiring decisions and stock prices.
The government is drawing on infrastructure work — a wellused playbook — to help lift the economy as consumers are wary of spending and businesses lack confidence to expand.
The People’s Bank of China has pledged to step up policy support for the economy this year.
Analysts expect further cuts in banks’ reserve requirement ratio and interest rates.
With the US Federal Reserve and other developed economies showing no urgency to start cutting interest rates, China may also face a longer period of subpar export growth in a further blow to policymakers’ hopes of engineering a strong economic recovery.