Pedestrians cross a street in Shanghai, China, Tuesday, February 28, 2023.
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China’s gross domestic product rose sharply in the first quarter, while global partners face slowing growth as central banks raise rates of interest to curb inflation.
China’s GDP grew by 4.5% in the first quarter, China’s National Bureau of Statistics said on Tuesday. That is the highest growth since the first quarter of last year – when the Chinese economy grew by 4.8 percent. – and higher than 4 percent. predicted in a Reuters poll. Quarter-on-quarter, the economy grew by 2.2%.
Growth in China has come under the highlight because it reopens after lifting most of the strict Covid restrictions which were in place for nearly three years. The economy grew by 2.9% in the fourth quarter of 2022.
Retail sales rose 10.6% in March as online sales of physical goods increased. Industrial production rose by 3.9%, barely below Reuters’ forecast of 4%.
Investment in fixed assets since the starting of the year was weaker than expected and increased by 5.1% in comparison with the previous year, as the growth of investment in infrastructure and manufacturing slowed down. Meanwhile, real estate investment continued to say no.
The economy grew by 3% in 2022, lower than Beijing’s official goal of around 5.5% set last March. For 2023, the government set a modest growth goal of “around 5%” last month.
At a pace exceeding the goal
Goldman Sachs said first-quarter China growth of 4.5% supported the company’s growth full-year forecasts of economic growth at the level of 6%.
“Today’s data is in line with our full-year optimistic growth forecast for China,” Goldman Sachs China chief economist Hui Shan told CNBC.
“It’s such a rebound after reopening [and] underpins our above-consensus growth forecast of 6% for the full year,” she said.
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While most analysts polled by Reuters don’t expect a change in the central bank’s benchmark rate of interest, some consider the People’s Bank of China may cut its annual key rate barely if inflation in China continues to say no.
Earlier this month, consumer inflation in China hit an 18-month low.
“Unequal is the right word to explain the current state of the economy, and likewise the level of confidence will not be as strong as the macro figures suggest,” economist Goldman said, adding that policy makers are likely to take care of a “pro-growth” stance in order pick-up on demand.
“So now policy makers are attempting to take care of a pro-growth stance in order that demand can step by step pick up because of lower rates of interest,” she said.
The stimulus ahead
China’s economy is prone to see one other government boost later in the year, NF Trinity managing director Helen Zhu told CNBC’s Street Signs Asia shortly after the data was released.
“I feel we are going to pass the 5% goal in Q2 and I hope by Q3 a lot of policy stimulus will probably be delivered,” she said.
She added that the latest readings dispel skeptics about China’s ability to fulfill its full-year growth goal for 2023 and would likely result in corresponding upward revisions to GDP forecasts.
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“The numbers are undoubtedly much stronger than anyone expected, and I feel it’s a really good begin to the year,” she said.
ING’s chief economist for China, Iris Pang, said she also expects the Chinese government to launch additional stimulus to spice up investment in infrastructure and consumption.
“To take care of the 5% growth goal for 2023, the government needs to hurry up infrastructure investments, most of which ought to be in the construction of metro lines and increasing the variety of 5G towers, as they’re already planned for this year,” she wrote. note before GDP report.
“We due to this fact expect faster GDP growth of 6.0% y/y in the second quarter. We maintain our full-year GDP forecast of 5% as external demand ought to be a problem this year,” Pang wrote.
Reflection of services
The worth of China’s services sector also increased by 5.4% in the first quarter in comparison with the previous year as the economy ended its COVID-19 zero policy.
The services production index rose 9.2% in March, led by accommodation, food service and knowledge technology services, in line with government data.
Nonetheless, economists warn that China’s economic recovery may take longer than expected Citi pushes its goal for the Hang Seng index by three months.
– Evelyn Cheng of CNBC contributed to this report.