April 19, 2023
BEIJING – China’s GDP growth rebounded to a stronger-than-expected 4.5 percent year-on-year target in the first quarter of this year after reaching 2.9 percent in the last quarter of 2022, pointing to a steady rebound amid the gradual normalization of production, data from the National Bureau of Statistics showed on Tuesday.
Given China’s strong recovery momentum and low comparison base in the previous year, officials and economists estimated that China’s growth could pick up notably in the second quarter, and the country is well on track to achieving its GDP growth target of around 5 percent in 2023.
Meanwhile, they warned that the foundations of recovery are not solid enough, saying that the economy could be dragged down by pressures from a cloudy global outlook, the fading of consumption momentum and challenges and uncertainties related to China’s exports and the property sector. More efforts should be made to further spur domestic demand and stabilize market expectations.
NBS spokesman Fu Linghui said China’s economy is stabilizing and picking up in the first quarter with the recovery of key indicators, laying a solid foundation for achieving the country’s annual growth target.
Fu told a news conference in Beijing on Tuesday that China’s growth would pick up notably in the second quarter given the low comparison base amid the COVID-19 pandemic in the past year, while growth may slow down in the third and fourth quarters due to a rise in the comparison bases last year.
On the back of the stronger-than-expected first quarter GDP report, Zhu Haibin, JPMorgan’s chief China economist, said his team raised its full-year GDP growth forecast for China from 6 percent year-on-year to 6.4 percent year-on-year.
China is well on track to achieving the government’s GDP growth target of “around 5 percent” for this year, said Lu Ting, chief China economist at Nomura.
“We maintain our GDP growth forecasts of 7.6 percent year-on-year for the second quarter and 5.3 percent for 2023,” he said.
Despite the improvements in the first quarter, Lu said his team still considers it more likely that the People’s Bank of China, the nation’s central bank, will slightly lower the interest rate of the medium-term lending facility operation — a key policy bench mark — in the next couple of months.
Iris Pang, chief China economist at Dutch bank ING, said there is no immediate need for the government to put massive stimulus into the economy, but it will probably keep its plan for infrastructure investment as a supplementary growth engine as her team expects the external market to deteriorate further this year.
Citing the first quarter figures, Louise Loo, China lead economist at British think tank Oxford Economics, said the combination of a steady uptick in consumer confidence as well as the still-incomplete release of pent-up demand suggests that the consumer-led recovery still has room to run.
NBS data showed that China’s retail sales rose by 5.8 percent in the first three months, compared to the 2.7 percent decline in the fourth quarter of last year.
The country’s value-added industrial output grew by 3 percent year-on-year in the first quarter, while fixed-asset investment rose by 5.1 percent year-on-year in the first quarter, according to the NBS.
Given the low base effect in the previous year, Loo said her team expects China’s GDP to accelerate on a year-on-year basis, while fading consumption momentum, the winding down of fiscal stimulus and weaker external demand would put downward pressure on domestic growth in the second half of the year.
Loo’s views were echoed by Ben Simpfendorfer, a partner at consultancy Oliver Wyman, who estimated that China’s recovery would strengthen over the coming quarters.
Looking ahead, he said the focus should be less on the growth rate and more on the opportunity to reform and rebalance the economy, to raise the share of consumption versus investment and to focus on upgrading manufacturing and encouraging innovation.
“China remains the world’s second-largest economy. And clearly, it’s growing at a faster rate than many other large economies this year, so its contribution (to global economic growth) will be important,” he added.
Erik Berglof, chief economist of the Asian Infrastructure Investment Bank, said that China is expected to see reasonable growth of around 5 percent this year, contributing to around one-third of global economic growth.
Samson Khaou, executive vice-president of Dassault Systemes Asia-Pacific, said the French industrial software company is highly confident about China’s economic growth this year, and the company will continue to invest more in the China market.
Khaou said he believes that China’s growth will be sourced by both domestic and global demand, and the manufacturing sector will be one of the key growth factors for China.