New data shows China’s economy grew strongly in the first three months of the year as China built more factories and exported huge amounts of goods to combat a severe real estate crisis and sluggish spending. domestic.
To stimulate growth, China, the world’s second-largest economy, has turned to a familiar tactic: investing heavily in its manufacturing sector, including building many new factories that have helped boost growth. worldwide sales of solar panels, electric cars and other products. products.
However, China’s bet on exports has worried many foreign countries and companies, concerned that the flood of Chinese goods exports to economies elsewhere could weaken the industry. their own production and leading to layoffs.
On Tuesday, China’s National Bureau of Statistics said the economy grew 1.6% in the first quarter compared with the previous three months. When projected for the full year, first-quarter data showed China’s economy growing at an annual rate of about 6.6%.
China needs strong growth to reduce persistently high youth unemployment and help companies and households cope with very high debt levels.
During the year, China achieved growth target around 5%, a target that many economists consider ambitious, although some have recently upgraded their forecasts. Last year China’s economy grew 5.2 percent.
The Statistics Department announced on Tuesday that output in the first three months of this year was 5.3% higher than the same period last year. This exceeded economists’ forecasts for a rise of 4.6 to 4.8%.
Strong exports earlier this year helped lift the Chinese economy. Export value rose 7% in dollar terms in January and February from a year earlier and 10% when measured in Chinese yuan. But the real contribution from exports to the country’s economy is significantly larger, as falling prices have obscured the full benefits of China’s exports.
Guo Tingting, Vice Minister of Commerce, said at a press conference last month that export volume actually increased 20% in January and February compared with last year. However, exports slowed down somewhat in March.
Retail sales also increased this year, but at a moderate pace of 4.7% compared to the first three months of last year. With street festivals and other activities, the government has encouraged families to spend more, even as many in China have increased savings to offset a recent decline in values. their apartment.
Domestic tourism spending and box office revenue both increased during February’s Lunar New Year, easily exceeding pre-Covid-19 levels. Smartphone sales are also up – though Not for Apple – as Chinese buyers increasingly choose local brands.
Widespread price declines, a phenomenon that can lead to deflation, continue to be a problem, especially for exports and at the wholesale level. Chinese companies are competing to lower export prices and gain a larger share of the global market, even if this means incurring heavy losses.
During high-level meetings earlier this month with Chinese officials, Finance Minister Janet L. Yellen warned that flooding the market with exports would disrupt supply chains and threaten industries and jobs. Chancellor Olaf Scholz of Germany expressed similar concerns when he visited China, although he also warned against protectionism in Europe.
China is ramping up production and exports to offset a sharp decline in home and apartment construction prices. Housing construction – and the production of steel, glass and other materials for housing – has been the biggest growth driver in China for many years. But new apartment sales have been falling steadily since the beginning of 2022. Very few construction projects are currently starting, as dozens of insolvent or near-insolvent developers are struggling to complete homes. that they promised to the buyer before.
Chinese officials blame the weakness of the Chinese economy partly on high interest rates abroad caused by the Chinese government. Federal Reserve to fight inflation in the US. Those interest rates have made it more attractive for Chinese families and companies to move money out of China, where interest rates are low, to foreign countries with higher interest rates.
“The negative impact of the high interest rate environment on the economy continues,” said Liu Haoling, chairman of China Investment Corporation, China’s sovereign wealth fund. He spoke in late March at the China Development Forum, a meeting in Beijing of policymakers and executives.
China’s manufacturing powerhouse, underpinned by years of policy direction and financial support from Beijing to local authorities and companies, has made the country’s goods one of the cheapest to buy. best of the world. The US government last week revealed that the average price of imports from China in March fell 2.6% from a year earlier.
China has asked companies to invest more in research and development in the hope that a wave of innovation will boost economic development.
The country is also requiring factories to pursue more automation. “By 2025, we will realize a new type of industrialization,” Jin Zhuanglong, Minister of Industry and Information Technology, said at the China Development Forum, noting that China China produces more than 30% of the world’s manufactured goods.
China’s state-controlled banking system has been funneling more money to industrial companies, helping them pay for widespread construction of new factories. Investment in manufacturing projects increased 9.4% in the first two months of this year compared with a year ago.
But many households are cutting back on spending. “Chinese companies, across many sectors, now produce more than domestic consumption can absorb,” Rhodium Group, a consulting firm, said in a report at the end of March.
People’s wariness about spending is something Li Zhenya sees every day. He manages Izakaya Jiuben, a Japanese restaurant in Beijing’s Wangjing area, which was once the headquarters of some of China’s largest technology companies.
A few years ago, workers lined up outside the restaurant, pouring out of nearby offices to spend their hard-earned money during short breaks between long shifts. These days, many restaurant seats are empty at lunch and dinner.
Mr. Li at Jiuben said: “People’s desire to consume is no longer high. He said, this restaurant earns about 2,156 USD/day in revenue, about half of the revenue just a few years ago.
“I’m losing money running the restaurant,” he said.
Jiuben is located on the fourth floor of Pano City Mall, where restaurants advertising Korean, Japanese and Chinese food operate next to empty stores. Some places look abandoned: The lights are off but a pile of takeout boxes lie next to the counter, the lights are still hanging or the tables and chairs are intact.
Centered around three curved, cobblestone-like buildings designed by Zaha Hadid, the Wangjing neighborhood was once a hub of activity for the capital’s busiest workers. Restaurants and stores benefit from the presence of companies such as Alibaba, JD.com and Meituan.
“Previously the lights were on when night fell, but now at least half of the lights are off,” Mr. Li said.
A government crackdown starting in 2020 forced companies to cut jobs. The others left Vuong Kinh. Covid-19 restrictions kept the neighborhood frozen for weeks, making it difficult for small businesses in Wangjing to recover.
Kou Yueyuan, owner of Smoon Bakery, located near Pano city, said: “The epidemic makes consumers more cautious. “It’s clear that customers are quite price sensitive,” Ms. Kou said.
Ms. Kou started her business more than eight years ago, selling baked goods such as bitter melon bread and ube mochi. She now places less emphasis on developing new baked goods with a variety of flavors. Instead, she focuses on keeping costs low so the bakery can offer cheaper prices.
Ly Huu contributing research.
