Hong Kong
CNN
—
China’s economy got off to a strong start in 2023 as consumers embarked on a spending spree following the end of three years of strict pandemic restrictions.
Gross domestic product increased 4.5% in the first quarter compared to last year, according to the National Bureau of Statistics on Tuesday. That beats a Reuters poll of economists’ estimate of 4 percent growth.
But private investment was barely budging and youth unemployment rose to the second highest level on record, indicating that the country’s private sector employers are still wary of risk. longer-term prospects.
Consumption recorded the strongest rebound. Retail sales jumped 10.6% in March from a year earlier, the highest level of growth since June 2021. Between January and March, retail sales increased 5.8%. mainly due to an increase in revenue from the food service sector.
“The combination of a steady rise in consumer confidence and a still incomplete release of pent-up demand suggests to us that the consumer-led recovery still has room to go,” said Louise Loo, senior China economist. at Oxford Economics.
Industrial production also recorded a steady increase. It increased by 3.9% in March, compared to 2.4% in the January-February period. (China typically combines its January and February economic data to account for the impact of the Lunar New Year holiday.)
Last year, GDP increased by just 3%, significantly missing the official growth target of “around 5.5%”, as Beijing’s approach to stamping out the coronavirus has wreaked havoc on supply chains and hammered government spending. consumption.
After mass protests engulfed the country and local governments found themselves short of cash to pay huge Covid bills, authorities finally abandoned the zero Covid policy in December. After a brief period of disruption due to a Covid surge, the economy has started to show signs of recovery.
Last month, the official indicator of non-manufacturing activity rose to its highest level in more than a decade, suggesting that the country’s crucial services sector was benefiting from a resurgence in consumer spending after the end of restrictions linked to the pandemic.
As the economic recovery gathers pace, investment banks and international organizations have revised their growth forecasts upwards for this year. In its World Economic Outlook released last week, the International Monetary Fund said China is “rebounding strongly” after reopening its economy. The country’s GDP will increase by 5.2% this year and 5.1% in 2024, it is forecast.
However, some analysts believe that the strong growth recorded in the first quarter is the product of a “slowdown” in economic activity from the fourth quarter of 2022, which was weighed down by pandemic restrictions and then by a reopening chaotic.
“Our main view is that the Chinese economy is deflationary,” Raymond Yeung, chief economist for Greater China at ANZ Research, said in a research report released Tuesday.
If adjustments were made to account for the impact of lagging economic activity, GDP growth in the first quarter could have been as low as 2.6%, he said.
Some key data released Tuesday supports this idea. For example, private investment was extremely low.
Private sector fixed asset investment increased only 0.6% between January and March, indicating a lack of confidence among entrepreneurs. (Public investment increased by 10%.) This is even worse than the 0.8% growth recorded between January and February.
The Chinese government has used surprising measures to restore confidence among private entrepreneurs, but the campaign has inspired more nervousness than optimism.
The all-important real estate sector is also mired in a deep recession. Real estate investment decreased by 5.8% in the first quarter. Real estate sales per surface area decreased by 1.8%.
“The national economy is recovering well, but the constraints of insufficient demand remain evident,” Fu Linghui, spokesperson for the NBS, said at a press conference in Beijing on Tuesday. “The prices of industrial products continue to fall and companies face many difficulties in terms of profitability. »
Unemployment continues to rise among young people.
The unemployment rate for 16-24 year olds reached 19.6% in March, up for the third consecutive month. This is the second highest on record, behind the level of 19.9% reached in July 2022.
The high unemployment rate among young people suggests “a slowdown in the economy,” Yeung said.
“By June, there will be a new group of graduates looking for jobs. The unemployment situation could worsen further if China’s economic momentum loses steam,” he added.
China’s Ministry of Education previously estimated that a record 11.6 million college graduates would seek jobs this year.
At last month’s meeting of the National People’s Congress, the country’s governing parliament, the government set out a cautious growth plan for this year, with a GDP target of around 5 percent and a creation target jobs of 12 million.
Cnn
