China’s economy grew faster than expected during the first three months of this year, boosting Beijing’s hopes of a manufacturing-led recovery. But growth in retail sales was disappointing as the property market remains on the floor, suggesting that it may take some time to rebuild consumer confidence.
Gross domestic product (GDP) grew by 5.3 per cent in the first quarter of 2024 compared to the same period last year, and by 1.6 per cent compared to the fourth quarter of 2023. This was comfortably above the annualised figure of 4.6 per cent predicted by analysts polled by Reuters.
Sheng Laiyun, deputy head of China’s National Bureau of Statistics, noted that industrial production was responsible for 37 per cent of the GDP growth. An improvement in exports and government-support measures helped industrial production grow by 6.1 per cent compared to the first three months of last year, and Sheng said businesses were gaining in confidence.
“Central departments and localities have issued a series of policies and measures to support the development of the real economy. Different localities have been implementing those policies at a faster pace, which boosts their confidence, improves their development environment and have produced positive effects,” he said.
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The Chinese authorities have introduced a succession of measures in recent months aimed at stimulating the economy, including support for private businesses and incentives for homebuyers. Beijing also issued an extra RMB1 trillion (€130bn) in sovereign bonds for disaster relief and reconstruction late last year.
Sheng acknowledged that although the figures for the first quarter as a whole surpassed expectations the data show a loss of momentum in March. Retail sales grew by 3.1 per cent in March, well below the 4.6 per cent analysts expected and industrial output rose by 4.5 per cent, far short of an expected 6 per cent.
“Central departments and localities have issued a series of policies and measures to support the development of the real economy. Different localities have been implementing those policies at a faster pace, which boosts their confidence, improves their development environment and have produced positive effects.
“You’ve probably noticed that there is a slight decline of some economic indicators. From a statistical standpoint we’ve analysed the reasons behind this. An important reason is the high base effects of last year. But if we look at the data for the month it was still quite impressive,” Sheng said.
“The fluctuation in industrial output in March is, on the one hand, attributed to the changes in the international landscape, and also to the domestic transition.”
China continues to struggle with a years-long crisis in the property sector which saw investment fall by 9.5 per cent year-on-year during the first quarter of this year. Beijing has sought to shift investment away from property into infrastructure and high-tech manufacturing.
This emphasis on what Xi Jinping calls “new productive forces”, including electric vehicles and other green energy technology, has brought Beijing into conflict with the European Union and the United States. Brussels and Washington fear that China’s overcapacity in such manufacturing will produce a flood of cheap exports that could snuff out these emerging industries in Europe and the US.
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