China‘s economy exceeded expectations in Q1, offering relief amidst property sector woes and rising local government debt. Analysts aimed for a 5% growth target in 2024, considering last year’s 5.2% rate possibly inflated by the COVID rebound.
Gross domestic product (GDP) rose 5.3% year-on-year in January-March, surpassing the 4.6% forecast and the previous quarter’s 5.2%. Jeff Ng from SMBC noted stable momentum but anticipated a reversal later in 2024.
Quarterly GDP growth hit 1.6%, higher than the predicted 1.4%. Despite this, China faces challenges like a prolonged property downturn, mounting local debts, and sluggish private spending.
Fitch’s negative outlook on China’s sovereign credit rating highlighted risks from shifting spending towards infrastructure and tech away from property.
Infrastructure investment aims to boost the economy amid cautious consumer spending and business hesitancy.
March data indicated cooling consumer inflation, ongoing producer price deflation, and slowing momentum in exports, retail sales, and bank lending. Industrial output rose 4.5%, below the forecast 6.0%, while retail sales grew 3.1%, lower than the expected 4.6%.
Fixed asset investment increased by 4.5% annually, beating the 4.1% expectation. However, Alvin Tan from RBC Capital Markets in Singapore warned of weak momentum.
China’s economy faces multifaceted challenges, including the enduring property crisis, tepid consumer spending, and global tensions, particularly with the US.
To counter these, the People’s Bank of China pledged increased policy support, potentially involving further cuts in banks’ reserve requirements and interest rates.
