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China’s gross domestic product grew 5.3 per cent in the first quarter against a year earlier, beating expectations as Beijing tries to steer a manufacturing-led revival of the world’s second-largest economy.
The strong first-quarter growth rate released on Tuesday, which exceeded a Reuters analyst poll forecasts of 4.6 per cent and an expansion of 5.2 per cent for the full year in 2023, followed mixed economic data in recent weeks.
“Generally speaking, the national economy got off to a good start in the first quarter . . . laying a good foundation for . . . the whole year,” the National Bureau of Statistics said.
It added that the “external environment is becoming more complex, severe, and uncertain, and the foundation for economic stability . . . is not yet solid”.
Industrial production grew 6.1 per cent in the first quarter compared with a year earlier, the NBS said, while industrial producer prices fell 2.7 per cent as deflationary pressures continued to weigh on the manufacturing sector.
Fixed asset investment grew 4.5 per cent against a year earlier in the quarter, boosted by a 9.9 per cent increase in manufacturing investment that was offset by a 9.5 per cent fall in property investment.
Retail sales expanded 4.7 per cent over the quarter, down from 5.5 per cent for the January-February period.
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“It’s better than expected, at the same time overall the retail sales and the property numbers look relatively weak,” Larry Hu, chief China economist at Macquarie, said of first-quarter growth.
He suggested the figures were driven by “exports and capex for new energy” industries, adding that any “step up” in stimulus was unlikely because growth was in line with official targets. “They’re probably going to hold off until exports slow down or property gets even worse,” he said.
China’s benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks slipped 1 per cent on Tuesday, while the small-cap CSI 1000 index fell 2.7 per cent. Other markets in Asia also declined following stronger than forecast retail sales data in the US, which reduced the likelihood of imminent interest rate cuts by the Federal Reserve.
Beijing has set a GDP growth target of 5 per cent this year, the same as last year and the lowest such figure in decades. But inflation fell below forecasts in March, indicating the persistence of deflationary pressures despite policymakers’ efforts to stimulate domestic demand and offset a property sector crisis.
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Since 2021, the Chinese economy has grappled with a wave of real estate developer defaults that have frozen construction activity and weighed confidence in the market, pushing down home sales.
The property sector showed little sign of recovery in the first quarter, with residential real estate investment down 10.5 per cent year on year, new housing starts tumbling 27.8 per cent by construction area and housing completion falling 20.7 per cent by construction area.
Exports in the first quarter were also weaker in dollar terms, but analysts said volumes have continued to expand as producers grab more global market share.
Goldman Sachs said retail sales growth in March was lower partly because of a high base effect from the year earlier, when China lifted pandemic restrictions. Industrial production growth also fell in March, partly because of fewer working days in the month this year compared with a year earlier.
The bank, which ahead of the data release revised its full-year growth target up from 4.8 per cent to 5 per cent, said that while the data indicated that manufacturing was still strong, Beijing would still need to provide policy support this year amid the housing sector weakness, fragile confidence and local government finance vehicle deleveraging.
On Monday, the People’s Bank of China held its key medium-term lending rate at 2.5 per cent.
Rating agency Fitch downgraded its outlook on China from “neutral” to “negative” last week, citing “property-reliant growth” as a source of increased uncertainty.
China’s finance ministry in response said the agency “failed to effectively anticipate the positive role of fiscal policies in promoting economic growth”.