China’s Q1 GDP growth solid but March data show feeble demand

BEIJING — China’s economy grew faster-than-expected in the first quarter (Q1), data showed on 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.

However, a raft of March indicators released alongside the gross domestic product (GDP) data — including property investment, retail sales and industrial output — showed that demand at home remains weak and is retarding overall momentum.

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%, noting that last year’s growth rate of 5.2% was likely flattered by a rebound from a COVID-hit 2022.

Gross domestic product (GDP) grew 5.3% 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% increase and slightly faster than the 5.2% expansion in the previous three months.

On a quarter-by-quarter basis, GDP grew 1.6% in the first quarter, above the forecast for growth of 1.4%.

The world’s second-largest economy has struggled to mount a strong and sustainable postCOVID bounce, burdened by a protracted 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 towards infrastructure and high-tech manufacturing.

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 economy was off to a solid start this year, but March data on exports, consumer inflation, producer prices and bank lending showed that momentum could falter again and reinforced calls for more stimulus to shore up growth.

Indeed, separate data on factory output and retail sales, released alongside the GDP report, underlined the persistent weakness in domestic demand.

Industrial output in March grew 4.5% from a year earlier, compared with a forecast increase of 6.0% and a gain of 7.0% for the January-February period.

Growth of retail sales, a gauge of consumption, rose 3.1% year on year in March, against a forecast increase of 4.6% and slowing from a 5.5% increase in the January-February period.

Fixed asset investment grew an annual 4.5% over the first three months of 2024, versus expectations for a 4.1% rise.