The Chinese economy grew more than expected in the first quarter: 5.3 percent

Clarion

Beijing.-Beijing has set a growth target of around 5% for 2024, although authorities have already admitted that it “will not be easy” to achieve it.

The Chinese economy grew more than expected in the first quarter of 2024, according to published data, but disappointing figures for households and the industrial sector suggest that the government will not have an easy time meeting annual targets.

In the first three months of the year, interannual economic growth was 5.3%, one tenth more than in the previous quarter, the National Statistics Office (ONE) indicated this Tuesday.

“The national economy maintained a good pace of recovery,” the ONE said in a statement.

The data for the first quarter also exceeds the projection of analysts consulted by Bloomberg, who were betting on 4.8%.

Beijing has set a growth target of around 5% for 2024, although authorities have already admitted that it “will not be easy” to achieve. Analysts pointed out that this is an ambitious goal given the challenges facing the world’s second largest economy.

This Tuesday’s data “deals a blow to market expectations by a wide margin,” Dan Weng, chief economist at Hang Seng Bank China, told AFP.

«Consumption and domestic investment [fueron] the main burden, and industry and infrastructure, the main driving force,” he added.

Problems in the property market continued to slow growth, with house prices declining and major developers, such as Country Garden and Vanke, experiencing declining revenues and struggling to pay their debts.

Last month, land prices continued to fall in China’s major cities, according to official data.

And with this, fear of a return to deflation increases, a phenomenon of prolonged price declines that discourages investment.

Derek Scissors, senior partner at the American Enterprise Institute (AEI), warned that “the good news ended” with the GDP data, which shows “obvious deflation.”

And it highlights that the growth rate of retail sales was lower than the same period last year.

China recently spent six months in deflation, weighed down by this weakness in domestic consumption. The Asian giant overcame this situation in February, but in March the price increase was minimal (+0.1% year-on-year).

“There are two readings of this data: either China’s surprising real GDP growth is unsustainable, or China’s surprising real GDP growth is false,” Scissors estimated.

Although some sectors are in good health, such as services, growth was affected by weak household and business confidence, in a context of economic uncertainty that hits consumption.

Both retail sales – the main indicator of household consumption – and industrial production experienced a decline last month, according to official data.

Retail sales grew 3.1% year-on-year in March, well below the indicator for the first two months of the year (5.5%).

Industrial production in turn grew by 4.5% in March, below 7% in January and February, according to ONE figures.

In March, the rating agency Fitch downgraded the sovereign debt outlook to “negative,” warning of “growing risks to Chinese public finances.”

Authorities announced a series of measures and the issuance of billions of dollars in sovereign bonds to boost infrastructure spending and consumption, but many analysts believe more should be done.

This Tuesday, Beijing insisted that the government’s efforts to promote growth are “producing an effect.” Clarín.