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China economic growth bounces back as consumers spend again

China economic growth bounces back as consumers spend again
Shoppers at a mall in Shanghai, China, on Saturday, 8 April 2023. (Photo: Qilai Shen/Bloomberg)

China’s economy grew at the fastest pace in a year in the first quarter as the end of Covid Zero gave way to stronger consumer spending and factory output, a sign the recovery is well on track.

Gross domestic product expanded 4.5% in the January-to-March period from a year prior, data released by the National Bureau of Statistics showed on Tuesday, faster than the 2.9% pace in the previous quarter and higher economists’ forecasts of 4%. 

A rebound in consumer spending and a ramping up in government infrastructure investment helped to boost growth in the first quarter. However, indicators for March showed a more mixed picture, with investment growth likely slowing and industrial activity remaining relatively subdued. 

  • Retail sales surged 10.6% in March from a year ago, higher than the 7.5% forecast by economists
  • Industrial output rose 3.9%, weaker than the 4.4% projected
  • Fixed-asset investment was also lower than expected, rising 5.1% in the first quarter from a year earlier. The contraction in property investment worsened to 5.8% in the period
  • The urban jobless rate decreased to 5.3% last month from 5.6% in February

China’s benchmark CSI 300 Index of equities edged up 0.1% as of 10.04am local time. The offshore yuan extended its gain to as much as 0.3% to touch a session high of 6.8648 per dollar after the release, before paring back to 6.8755. China’s 10-year government bond yield slipped 1 basis point to 2.84%.

Fu Linghui, a spokesman for the NBS, said a complex international environment and insufficient domestic demand mean the foundation for the economy’s rebound is “not yet solid”.

Recent economic indicators have provided conflicting signals about the recovery, suggesting the growth outlook remains uncertain. While credit and exports surged in March inflation remained weak, a sign of muted domestic demand in the economy.  

Economists are divided about whether the government needs to roll out more stimulus to boost growth. Beijing last month set a cautious GDP growth target of around 5% for this year, suggesting there isn’t scope for any significant economic support. 

People’s Bank of China Governor Yi Gang said last week the economy was on track to grow in line with the target, adding that the property market was stabilising. The central bank on Monday refrained from cutting a key interest rate and curbed its cash injection into the banking system — although some analysts still see scope for easing in coming months. BM/DM


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