China’s economy has recovered surprisingly strongly: the world’s second largest economy grew by 4.5 percent in the first quarter compared to the same period last year – faster than it has been for a year. The spokesman for the statistics office, Fu Linghui, spoke of a “good start” at a press conference in Beijing on Tuesday. But he emphasized the continuing “difficult and unstable international environment” and the insufficient domestic demand: “The basis for the recovery is not yet stable.”
After the end of the strict zero-Covid strategy at the beginning of December and the wave of corona infections at the turn of the year, growth in the first three months was significantly faster than in the last quarter of 2022, when only 2.9 percent was achieved. However, it is still a little slower than the government’s target of “around five percent” for the current year. China’s economy grew just 3 percent last year due to the strain of recurring lockdowns, forced quarantines and supply chain disruptions.
There is speculation about possible economic measures
But with the lifting of Covid-19 restrictions, malls and restaurants are filling up again. Everyday life has largely returned. The economic planners are now mainly hoping that consumers will spend more money again. Retail sales rose 5.8 percent in the first quarter after falling 0.2 percent last year. In March, retail sales grew more than expected by 10.6 percent.
However, from the point of view of the central bank, the recovery is not yet sufficiently secured, so that there is speculation about possible economic measures. “The economy is showing a trend of upswing and improvement, but the fundamentals of the recovery are not yet solid,” the central bank said on Friday – similar to what is now happening with the statistics office. It will “maintain reasonable credit growth at a stable pace.” Private consumption should also be encouraged and sufficient liquidity secured.
Strong growth in exports
Important leading economic indicators did not exude any optimism either. The mood in the executive floors of the manufacturing sector deteriorated in March. The purchasing manager index of the business magazine “Caixin” fell from 51.6 to 50 points. A reading below the 50-point mark indicates a contraction in industrial activity. The official index, which looks more closely at large and state-owned companies, also fell by 0.7 points to 51.9 points. Industrial production also increased by only three percent in the first quarter. In March, the increase of 3.9 percent was below expectations.
Economic growth may also have been boosted by better-than-expected export growth in March. The value of Chinese exports soared 14.1 percent. It was the first increase in five months. The increase was explained by the elimination of post-Covid supply chain issues and catch-up effects. However, experts point to the still relatively weak global demand for “Made in China” products, which is clouding the prospects for China’s export machinery.
