China’s economy has started 2024 on a stronger footing than anticipated, with official figures revealing a robust growth rate of 5.3% in the first quarter. This growth outpaced both the 5.2% expansion witnessed in the previous quarter and the conservative 4.6% forecasted by economists. Such positive news has buoyed confidence in China’s economic resilience amid global uncertainties.
The acceleration in growth, particularly noteworthy in a quarter marked by geopolitical tensions and economic uncertainties, underscores the resilience and adaptability of China’s economy. External demand played a pivotal role in driving this growth, with exports surging by 14% year-on-year, reflecting China’s continued importance as a global manufacturing hub and exporter.
The strong performance in the first quarter aligns well with Beijing’s growth target of around 5% for 2024. This target, though ambitious given global challenges, now appears increasingly achievable, bolstered by the robust start to the year.
Analysts have pointed to several factors contributing to China’s impressive economic performance. Zhiwei Zhang, President and Chief Economist at Pinpoint Asset Management, highlighted the role of government policy in supporting growth. The government’s current policy stance seems validated by the strong first-quarter figures, reducing the likelihood of further monetary easing measures such as interest rate cuts by the People’s Bank of China.
However, despite the overall positive trajectory, some indicators fell short of expectations. Industrial output grew by 4.5% year-on-year in March, missing the anticipated 6%, while retail sales expanded by 3.1%, lower than the expected 4.6%. These figures indicate underlying challenges within the economy, including sluggish industrial capacity utilization and softening domestic consumption.
Bruce Pang, Chief Economist and Head of Research for Greater China at JLL, highlighted the importance of government initiatives in bolstering domestic demand. Policies aimed at stimulating equipment investment and encouraging product renewal could provide a temporary boost, supporting the attainment of the annual GDP target.
Nevertheless, China’s real estate sector continues to face headwinds, with property investments declining by 9.5% year-on-year in the first quarter. The ongoing struggles in this sector, exemplified by the recent troubles faced by major real estate players like Evergrande and Country Garden Holdings, pose a significant challenge to China’s economic stability.
While the first-quarter GDP growth exceeded expectations, analysts caution against undue optimism, citing the unbalanced nature of the expansion. Muted domestic demand remains a key concern, casting a shadow over the sustainability of China’s economic recovery.
In conclusion, China’s economy has displayed resilience and momentum in the face of global challenges, with first-quarter growth surpassing expectations. While external demand has been a key driver, challenges persist, particularly in the real estate sector and domestic consumption. Policymakers will need to navigate these challenges carefully to ensure sustained and inclusive economic growth in the coming quarters.
