Hong Kong
CNN
—
China’s economy got off to a solid start in 2023, as consumers continued to spend heavily after three years of strict pandemic restrictions ended.
Gross domestic product increased by 4.5% in the first quarter from a year ago, according to the report National Bureau of Statistics on Tuesday. That beat the 4% growth estimate from a Reuters poll of economists.
But private investment barely budged and youth unemployment rose to its second-highest on record, suggesting the country’s private sector employers remain wary About longer-term outlook.
The strongest recovery in consumption. Retail sales rose 10.6% in March from a year earlier, the highest growth since June 2021. In the January-March months, retail sales rose 5.8 %, mainly thanks to the sudden increase in revenue from the food service industry.
Louise Loo, lead China economist at Oxford Economics, said: “The combination of steadily rising consumer confidence as well as pent-up demand that has yet to be fully unleashed shows us. that a consumer-led recovery still has room to make.”
Industrial production also showed a steady increase. It rose 3.9% in March, compared with 2.4% in the January-February period. (China typically combines its economic data for January and February to account for the impact. activities of the Lunar New Year holiday.)
Last year, GDP increased more only 3%, far short of the official growth target of “about 5.5%”, as Beijing’s approach to stamping out the coronavirus has ravaged supply chains and hampered consumer spending. .
After mass street protests spread across the country and local governments ran out of cash to pay the huge Covid bills, authorities finally canceled the Covid-free policy. in December. After a short interruption due to the sudden increase of Covid, the economy has begun to show signs of recovery.
Last month, an official measure of non-manufacturing activity rose to its highest level in more than a decade, suggesting the country’s key services sector is benefiting from a surge in consumer spending. used after the end of pandemic restrictions.
As the economic recovery gains traction, investment banks and international institutions have upgraded their growth forecasts for China this year. In its World Economic Outlook released last week, the International Monetary Fund said China is “recovering strongly” from reopening its economy. The country’s GDP will grow 5.2% this year and 5.1% in 2024, it predicts.
However, some analysts believe that the strong growth reported in the first quarter was the product of a “backload” of economic activity from the fourth quarter of 2022, which was weighed down by restrictions. about the pandemic and then the chaotic reopening.
“Our core view is that the Chinese economy is deflationary,” Raymond Yeung, chief economist for Greater China at ANZ Research, said in a research note on Tuesday.
If adjustments were made to account for the impact of stalled economic activity, GDP growth in the first quarter could be as little as 2.6%, he said.
Some key data released on Tuesday supports this idea. For example, private investment is extremely weak.
Private-sector fixed-asset investment grew only 0.6% from January to March, showing a lack of confidence among entrepreneurs. (State-led investment, meanwhile, grew 10%.) The figure was even worse than the 0.8% growth recorded between January and February.
The Chinese government used surprise measure to restore confidence among private entrepreneurs, but the campaign has caused more anxiety than optimism.
The most important real estate sector is also mired in a deep recession. Investment in real estate fell 5.8% in the first quarter. Real estate sales by floor area decreased by 1.8%.
“The domestic economy is recovering well, but constraints due to insufficient demand are still apparent,” NBS spokesman Fu Linghui said at a press conference in Beijing on Tuesday. “The price of industrial products is still falling, businesses face many difficulties in making profits.”
Unemployment continues to rise among young people.
The unemployment rate for 16- to 24-year-olds hit 19.6% in March, the third consecutive month. This is the second highest on record, just behind the 19.9% level reached in July 2022.
The high unemployment rate among young people shows “the stagnation of the economy,” Yeung said.
“By June, there will be a new batch of graduates looking for work. Unemployment could worsen further if China’s economic momentum slows down,” he added.
China’s education ministry previously estimated that there will be 11.6 million university graduates looking for work this year.
At last month’s meeting of the National People’s Congress, the country’s rubber parliament, the government laid out a conservative growth plan for this year, with a GDP target of around 5% and a target of creating employment is 12 million.
