BEIJING – China's economic growth accelerated in the latest quarter as consumer flocked back to shops and restaurants following the abrupt end of anti-virus controls.
The 4.5% growth in gross domestic product from January to March compared to the same period in 2022 was the fastest in the past year, and outpaced the 2.9% growth in the previous quarter, according to government data released Tuesday.
But authorities cautioned that China will likely face import and export pressures in the coming months amid an uncertain international economic environment, and also warned of inadequate domestic market demand in the world’s No. 2 economy.
Fu Linghui, the director general of China's National Bureau of Statistics, said Tuesday that authorities will implement various policies to “stabilize growth” and stimulate domestic demand, as well as help support the development of emerging industries.
The higher-than-expected rise in GDP for the quarter comes amid a rebound in consumption, as people flocked to shopping malls and restaurants after “zero-COVID” restrictions were removed at the end of 2022. Analysts initially pegged economic growth to be about 4%.
Earlier this year, China’s government set this year’s economic growth target at “around 5%," a conservative target that will only be met if GDP grows faster in the months ahead.
In March, total retail sales of consumer goods went up by 10.6% year on year, and grew 7.1 percentage points compared to the first two months of the year.
“The combination of a steady uptick in consumer confidence as well as the still-incomplete release of pent-up demand suggest to us that the consumer-led recovery still has room to run,” said Louise Loo, an economist at Oxford Economics in a note.
But while consumption and retail sales have grown, other economic indicators with weaker growth such as industrial output and fixed-asset investments indicate an uneven recovery. Slowing price indices also point toward inadequate demand.
Industrial production output, which measures activity in the manufacturing, mining and utilities sectors, grew by 3.9% in March compared to the same time last year.
Fixed-asset investment — in which China invests in infrastructure and other projects to drive growth — rose by 5.1% in the first three months of 2023 compared to the same period last year. The growth was down from 5.5% in the first two months of the year. Private investments were also weak, growing just 0.6%.
China’s exports surged in March, according to data earlier this week, although this could be the result of suppliers catching up in fulfilling orders disrupted during COVID-19. In the first quarter, exports grew 8.4%.
The unemployment rate in urban areas fell to 5.3% in March, down 0.3% from the month before. But youth unemployment jumped to 19.6%, a near-record high.
Investors are expected to scrutinize China’s first-quarter economic data for indicators of recovery following years of harsh lockdowns and a crackdown on the industries such as technology and real estate.
Last year’s growth fell to 3%, hampered by anti-virus controls that caused snap lockdowns and kept millions at home, sometimes for weeks on end.
GDP is expected to accelerate on a year-on-year basis given Shanghai's COVID-19 lockdowns last year, which impacted the economy, according to Oxford Economic's Loo, who said that growth is expected to slow in the second half of the year.
“The fading of consumption momentum, the winding down of fiscal stimulus, and a weaker incoming external demand would put downward pressure on domestic growth in H2,” she said.
On Monday, China’s central bank kept rates on its one-year policy loans unchanged. Last week, it had vowed to step up support for the economy and maintain ample liquidity to support growth.