The initial quarter of this year reflected a swifter than anticipated growth in China’s economy, fuelling Beijing’s optimism for a recovery driven substantially by manufacturing. Yet the rise in retail sales fell short of forecast, with an ongoing slump in the housing market suggesting a potential delay to reinstating consumer assurance.
The first quarter of 2024 saw an expansion of 5.3 per cent in its Gross Domestic Product (GDP) from the same period the previous year, and achieved 1.6 per cent growth compare to the last quarter of 2023. This performance comfortably surpassed the year-on-year prediction of 4.6 per cent growth as per the Reuters Poll.
With 37 per cent contribution to the GDP growth, industrial production played a key role, noted Sheng Laiyun, deputy head of China’s National Bureau of Statistics. The rise in exports along with governmental assistance allowed industrial production to grow 6.1 per cent than the first quarter of the previous year. This brought about confidence among businesses according to Sheng.
The official outlined that, “A series of policies and measures have been rolled out by central departments and regions to bolster the actual economy. Rapid implementation of these policies in various regions has enhanced confidence, upgraded their developmental environment and has led to encouraging results.”
In recent times, the Chinese government has launched a series of strategies aiming to propel the economy, which includes, support for privately held companies and incentives to potential home buyers. Additionally, an extra RMB1 trillion (€130 billion) sovereign bonds were issued by Beijing with a purpose of reconstructing and mitigating disasters, towards the close of last year.
While expressing that the overall first quarter figures defied anticipations, Sheng recognised a downward trend in momentum by March-end. Growth in retail sales in March were recorded at 3.1 per cent, considerably lower than the predicted 4.6 per cent, while industrial outputs also lagged at 4.5 per cent against an anticipated 6 per cent. He reiterated, “The swift execution of measures and policies across regions, designed to strengthen the actual economy, has resulted in an uplifted developmental environment, fostering confidence and steering positive results.”
Sheng observed that despite a slight downturn in various economic signals, the data for the month remains somewhat promising. This can be partly attributed to the high base effects from last year, an aspect our statistical analysis has identified. The changes in international circumstances and domestic adjustments have contributed to this fluctuation, particularly observed in industrial production in March.
China’s ongoing struggle with a crisis in the property sector that has unfolded over several years, remains a concern. Recent statistics showed a dip in property investment by 9.5 per cent year on year throughout this year’s first quarter. Beijing is making efforts to redirect investment from property towards infrastructure and advanced manufacturing sectors.
These so-called “new productive forces”, a term coined by Xi Jinping, encompassing green technology like electric vehicles have led to disagreements with the European Union and United States. There’s a common apprehension among officials in Brussels and Washington that China’s manufacturing overcapacity might lead to an influx of inexpensive exports. This could potentially threaten the nascent industries in Europe and the US.