Contrary to expectations and despite the global pushback, China’s economic recovery boomeranged in the first quarter from a coronavirus-induced slump earlier last year, propelled by stronger demand at home and abroad and continued government support for smaller firms.
Gross domestic product (GDP) jumped a record 18.3 per cent in the first quarter from a year earlier, official data showed on Friday, slower than the 19 per cent forecast by economists in a Reuters poll, and following 6.5 per cent growth in the fourth quarter last year.
While the reading is heavily skewed by the plunge in activity a year earlier, the increase is the strongest since at least 1992, when official quarterly records started.
“China’s Q1 started good, especially in retail sales, which was behind the economic recovery – going forward, the focus point would be how to continue the growth and manage the financial risk,” said Marco Sun, chief financial markets analyst at MUFG Bank in Shanghai.
“Speaking of managing the financial risk, we are likely to see quantitative tightening via guidance on credit growth in Q2 and maybe longer.”
Aided by strict virus containment measures and emergency relief for businesses, the economy has recovered from a steep 6.8 per cent slump in the first three months of 2020, when an outbreak of COVID-19 in the central city of Wuhan turned into a full blown epidemic.
The recovery has been led by export strength as factories raced to fill overseas orders and a steady pickup in consumption that comes despite sporadic COVID-19 cases in some cities.
On a quarterly basis, growth slowed to 0.6 per cent in January-March from a revised 3.2 per cent in the previous quarter, missing expectations for a 1.5 per cent increase.
March industrial output grew 14.1 per cent year-on-year, slowing from a 35.1 per cent surge in the January-February period and lagging a forecast 17.2 per cent on-year rise.
Retail sales increased 34.2 per cent year-on-year in March, beating a 28.0 per cent gain expected by analysts and stronger than the 33.8 per cent jump seen in the first two months of the year.
Fixed asset investment surged 25.6 per cent in the first three months from the same period a year earlier, versus a forecast 25.0 per cent increase, and slowing from January-February’s 35 per cent rise.
The world’s second-largest economy is expected to grow 8.6 per cent, according to a Reuters poll, following a 2.3 per cent rise last year, which was its weakest in 44 years but still made China the only major economy to avoid contraction.
That would easily beat the government’s 2021 annual growth target of above 6 per cent.
With the economy back on a more solid footing, China’s central bank is turning its focus to cooling credit growth to help contain debt and financial risks, but it is treading cautiously to avoid derailing the recovery, analysts said.
Policymakers, meanwhile, have vowed not to make any sudden policy shifts.
Authorities are especially concerned about financial risks involving the country’s overheated property market and have asked banks to trim their loan books this year to guard against asset bubbles.
Separate data on Friday showed China’s new home prices rose at a faster pace in March, even as authorities take measures to clamp down on property speculation.
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