China’s economic recovery quickened sharply in the first quarter from last year’s deep COVID-19 slump, propelled by stronger demand at home and abroad, and continued government support for smaller firms.
However, the brisk expansion, heavily skewed by the plunge in activity a year earlier, is expected to moderate later this year, as the government turns its attention to reining in financial risks in overheating parts of the economy.
GDP jumped 18.3 percent in the first quarter from a year earlier, official data showed yesterday.
While that undershot the 19 percent forecast by economists in a Reuters poll, it was the fastest growth since quarterly records began in 1992 and up from 6.5 percent in the fourth quarter last year.
“The upshot is that with the economy already above its pre-virus trend and policy support being withdrawn, China’s post-COVID rebound is leveling off,” Capital Economics senior China economist Julian Evans-Pritchard said. “We expect quarter-on-quarter growth to remain modest during the rest of this year as the recent boom in construction and exports unwinds, pulling activity back towards trend.”
Aided by strict virus containment measures and emergency relief for businesses, the economy has recovered from a steep 6.8 percent slump in the first three months of last year, when an outbreak of COVID-19 in Wuhan rapidly became a crippling pandemic that has killed about 3 million worldwide.
China’s rebound has been led by exports as factories raced to fill overseas orders and more recently a steady pickup in consumption, as shoppers returned to restaurants, malls and auto dealerships.
Retail sales increased 34.2 percent year-on-year last month, beating a 28 percent gain expected by analysts and stronger than the 33.8 percent jump seen in the first two months of the year.
However, other data showed a moderation in expansion with sequential growth slowing to 0.6 percent in January-March from a revised 3.2 percent in the previous quarter, missing expectations for a 1.5 percent increase.
Factory output grew 14.1 percent year-on-year last month, slowing from a 35.1 percent surge in the January-February period and lagging a forecast 17.2 percent rise.
Chinese National Bureau of Statistics spokeswoman Liu Aihua (劉愛華) told a news conference yesterday that while the economy started the year on a firm footing, the services sector and smaller firms still faced challenges, while consumer inflation was likely to remain moderate.
Data last week showed that consumer prices rising at only a modest pace last month, even as factory gate inflation hit a near three-year high.
“The trend of normalization may continue for the rest of the year, and domestic consumption is expected to be the major growth driver,” said Chaoping Zhu (朱超平), global market strategist at JP Morgan Asset Management in Shanghai. “In terms of policy response, the central bank and fiscal authorities are returning to a more neutral stance, although some selective measures might be continued in order to support the small and medium-sized enterprises.”
Li Wei (李煒), senior China economist at Standard Chartered in Shanghai, expected second-quarter growth to slow to 7 percent.
The world’s second-largest economy is expected to grow 8.6 percent this year, according to a Reuters poll, which would easily beat the government’s annual growth target of above 6 percent.
China’s GDP grew just 2.3 percent rise last year, its weakest expansion in 44 years, but still making it the only major economy to avoid contraction as other industrial powers struggled with the COVID-19 pandemic hit.
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