Chinese GDP Q1 growth exceeds expectations
THE Chinese economy expanded by 4.8% year-on-year (y/y) in the first quarter of 2022.
This was well above the consensus forecast of a 4.2% gain and the fourth quarter’s 4.0% rise and resulted in 2.85 million new urban jobs being created.
The first quarter growth performance was achieved despite an increasingly complex international geopolitical environment after Russia invaded Ukraine on February 24, and there was a resurgence of Covid-19 cases in China.
The National Bureau of Statistics said the value added of the primary sector rose by 6.0% y/y, that of the secondary sector increased by 5.8% y/y, and that of the tertiary sector, the sector most impacted by restrictions on mobility, grew by 4.0% y/y.
The value added of agriculture (crop farming) managed a 4.8% y/y gain due to generally favourable weather and stronger agricultural production services, spring farming and preparation being carried out in a steady and orderly manner.
According to the year-round planting intentions survey, the planting area intended for wheat and rice nationwide was generally stable and that for soy bean increased considerably. In the first quarter, the output of pork, beef, mutton and poultry jumped by 8.8% y/y, which meant food prices fell by 1.5% y/y in March compared with a 6.6% y/y increase in food prices in South Africa in the same month.
I am an optimist, so for me the unreasonable pessimism about China’s prospects is not based on facts and is of no help in understanding reality.
Only rational and objective analysis can lead to evidence-based conclusions, so from the South African perspective we need to look at Chinese industrial production, as that is the main determinant of how many South African products go to China.
In that respect, the National Bureau of Statistics reported good news as the total value added of industrial enterprises grew by 6.5% y/y in the first quarter. The value added of mining increased by 10.7% y/y, that of manufacturing rose by 6.2% y/y and that of production and supply of electricity, thermal power, gas and water grew by 6.1% y/y.
The value added of high-tech manufacturing and equipment manufacturing increased by 14.2% y/y and 8.1% y/y respectively.
In terms of products, the production of new-energy automobiles, solar cells and industrial robots was up by 140.8%, 24.3% and 10.2% respectively.
To fuel the growth in industrial production, Chinese companies had to invest in new capacity and this is reflected in the manufacturing sector’s 15.6% y/y surge in investment in fixed assets in the first quarter.
Investment in high-tech industries grew by 27.0%, with investment in high-tech manufacturing soaring by 32.7% with the investment in manufacturing of electronic and communication equipment and in manufacturing of medical equipment, measuring instruments and meters surging by 37.5% and 35.4% respectively.
Despite strong growth, inflation remained subdued in China in contrast to the US where consumer inflation jumped to a multidecade high of 8.5% y/y in March. This was the highest inflation rate since December 1981 and an acceleration from 7.9% in February.
US food prices in March jumped by 8.8% y/y, the most since May 1981.
China’s consumer inflation rate in March by contrast was only 1.5% y/y. China has set a target of CPI at around 3% for this year, the same as in 2021.
High consumer inflation in many parts of the world is eroding the buying power of most consumers as the pace of wage increases is lagging that of inflation. In the US, for instance, average hourly earnings for all employees increased by 5.6% y/y in March, well shy of the 8.5% y/y jump in consumer inflation. By contrast, the nationwide per capita disposable income of Chinese residents increased by 6.3% y/y, which resulted in that being 5.1% y/y more than consumer inflation.
Generally speaking, the Chinese economy in the first quarter continued the momentum of recovery, defying pessimistic predictions.