by Kevin Yao and Joe Cash
BEIJING (Reuters) – China’s economy grew 4.5% year on year in the first quarter, a pace better than expected, helped by the end of COVID-19 restrictions, but slowing headwinds world bodes well for an uncertain horizon.
Analysts polled by Reuters had expected gross domestic product (GDP) growth of 4.0% in the January-March period, up from the 2.9% advance recorded in the last three months of 2022.
The government is officially targeting growth of around 5% for this year.
On a quarterly basis, GDP grew by 2.2%, in line with expectations and improving on a revised increase of 0.6% in the previous quarter.
“The economic recovery is on track. The silver lining is consumption, which is strengthening as household confidence improves,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “Strong export growth in March also likely helped boost GDP growth in the first quarter.”
The tightening of the monetary policies of the major central banks in the face of inflation has dented global growth, leaving many countries, including China, dependent on domestic demand to revive activity.
Chinese officials have pledged to boost aid to the economy to the tune of $18 trillion but their room for maneuver is limited as companies face debt risks, structural problems and fears of a global recession. .
So far, China’s recovery has remained uneven: consumption, services and infrastructure spending are up but industrial production is lagging due to weak global growth, while rising bank savings raises doubts about demand.
Exports surged unexpectedly last month, but analysts said the improvement partly reflected suppliers catching up on missed orders following the COVID-19 disruptions last year.
Several other March indicators released alongside GDP data showed retail sales growth accelerating to 10.6%, above expectations, while industrial production rose 3. 9%, against +2.4% in February and +4.0% for the Reuters consensus.
The sharp rebound in consumption is linked to a favorable base effect after the anti-COVID restrictions that weighed on consumers in early 2022.
Investments in Chinese infrastructure grew by 8.8% over one year in the first quarter, outperforming all investments in fixed assets (+5.1%). Real estate investment, on the other hand, fell by 5.8%.
(Kevin Yao and Joe Cash, Laetitia Volga)
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