China’s gross domestic product grew 4.5 percent in the first quarter, as strong growth in exports and infrastructure investment, as well as a rebound in retail consumption and property prices, underpinned a recovery in the world’s second-largest economy.
The official figure, which beat analysts’ expectations of a 4 percent increase, followed last year’s efforts by Chinese leader Xi Jinping’s government to make sudden policy changes and business confidence damaged by the outbreak of the pandemic.
The January-March growth rate was still below the government’s full-year target of 5 percent, held back by the nationwide Covid-19 outbreak earlier this year, but economists expect the pace to pick up as the year progresses.
Xi, who began an unprecedented third term as China’s president last month, wants to revive economic growth. Gross domestic product grew just 3 percent last year, short of the official target of 5.5 percent, the lowest in decades.
“The recovery is certainly underway,” said Tao Wang, chief China economist at UBS. “The pace at the beginning of the year was stronger than expected.”
China’s resurgence is critical to global economic growth this year, with developed nations suffering from persistently high inflation, rising interest rates and sluggish growth following the pandemic and Russia’s all-out invasion of Ukraine.
China’s National Bureau of Statistics said: “The national economy has made a steady recovery and is off to a good start.” But the agency warned that the situation is “complex and volatile, insufficient domestic demand remains and the basis of economic recovery is not yet strong.”
Chinese commodity markets rallied following the data release on Tuesday, but stocks were unable to pare early gains.
China abandoned zero-covid restrictions in December, amid public protests against lockdowns that have paralyzed cities in the country for most of the year. The rebound has fueled buoyant demand in the retail sector, where sales rose 5.8 percent in the first quarter and 10.6 percent in March. But the baseline was low compared to last year as Shanghai began a months-long lockdown at the end of February 2022.
Premier Li Qiang, Xi’s new number two, signaled in China’s rubber-stamp parliament last month that the government would relax its crackdown on businesses that have siphoned billions of dollars from property developers and internet platforms.
Manufacturing investment rose 7 percent in the first quarter, while industrial production gained 3 percent. Exports showed strong growth, rising 8.4 percent in the first quarter, and government-led infrastructure investment rose 8.8 percent, while total fixed asset investment rose 5.1 percent. Private investment was weak, only 0.6 percent, indicating a decrease in March.
The crisis in the property sector continues, with new home starts falling 19.2% in the first quarter. Home sales fell 1.8 percent by area, but sales by value rose 4.1 percent, signaling the start of a price recovery. In March, new home prices rose at the fastest pace in 21 months.
The unemployment rate fell to 5.3 percent in March from 5.6 percent in February, but youth unemployment was the second highest on record at 19.6 percent.
Economists said the pace would pick up in the second quarter, helped by lower output, but warned that consumption and property could struggle to sustain strong growth, while exports could be threatened by weaker developed markets.
Experts say that this administration has been hampered by a lack of integrity since it overwhelmed the private sector.
Keu Jin, Professor at the London School of Economics and author The new Chinese playbookHe said the biggest obstacle is the gap in private sector interest in both consumption and investment.
“It will take time for confidence to return to the Chinese economy,” she said.
Additional reporting by Hudson Lockett in Hong Kong
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