Q1 GDP beats expectations with 4.8% YoY growth

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A traffic police officer prepares to check a truck at a gas station near Shanghai, which has ordered tougher restrictions on travel in and out of the city as China struggles against its worst Covid outbreak since the early days of the pandemic in 2020.

Yin Liqin | China News Service via Getty Images

BEIJING — China’s first-quarter GDP grew faster than expected despite the impact of Covid lockdowns in parts of the country in March, according to data released Monday by the National Bureau of Statistics.

First-quarter GDP rose 4.8%, beating expectations of a 4.4% increase from a year ago.

Capital investment for the first quarter rose 9.3% from a year ago, beating expectations for growth of 8.5%. Investment in the manufacturing sector rose 15.6% in the first quarter from a year ago, and infrastructure recorded an increase of 8.5% over the same period.

Industrial production in March rose 5%, beating forecast growth of 4.5%.

However, retail sales in March fell 3.5% more than expected from a year earlier. Analysts polled by Reuters had expected a decline of 1.6%.

From March, the country struggled to contain its worst Covid outbreak since the initial phase of the pandemic in 2020. At the time, lockdowns in more than half of the country led to a contraction of 6.8 % growth in the first quarter over the previous year.

“We should be aware that with an increasingly complicated and uncertain domestic and international environment, economic development faces significant difficulties and challenges,” the office said in a statement.

Rising unemployment

The unemployment rate in 31 major Chinese cities rose from 5.4% in February to 6% in March – the highest rate on record according to official data dating back to 2018.

“This indicates that the unemployment problem in major cities has become more severe than when the Covid pandemic started in 2020,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

“Covid outbreaks only forced Shanghai and some other cities into lockdowns in late March and early April. Therefore, the economic downturn likely worsened in April,” he said.

As Covid enters its third year, China again faces the challenge of ensuring record numbers of graduates find jobs. This year, the number of higher education graduates is expected to increase by 1.67 million compared to 2021 to reach 10.76 million.

In March, the unemployment rate for 16-24 year olds remained much higher at 16%, the highest since August 2020.

Overall, the national urban unemployment rate rose in March to 5.8% from 5.5% in February.

The rise “reflects greater difficulties for production and business operations, and greater pressure on employment,” Fu Linghui, spokesperson for the National Bureau of Statistics, said in a Monday briefing in Chinese. , according to a CNBC translation.

He noted that since March some people have had a harder time finding jobs due to the impact of Covid nationwide. This contrasts with a historic seasonal pattern in which the unemployment rate tended to fall in March, after rising in January and February as workers changed jobs around the Spring Festival, Fu said.

The role of real estate

“To achieve this year’s 5.5% economic growth target, consumption must not be dragged down by the pandemic, real estate investment must stop falling and stabilize as soon as possible, fiscal spending must be strong enough and imports and exports cannot contribute negatively,” Bruce Pang, head of macro research and strategy at China Renaissance, said in Chinese, translated by CNBC.

Given that retail sales and trade have limited ability to contribute to growth, the market is more expecting real estate to play a role, he said.

Although [the] The Chinese economy will be under pressure in the short term due to the controls of the pandemic, we remain confident in the long-term resilience and vitality of the Chinese economy.

Monica Li

Chief Equity Officer, Fidelity International

Real estate, which has struggled since Beijing’s crackdown on developers’ heavy use of debt, saw investment rise 0.7% in the first quarter from a year ago. And this despite double-digit declines in floor space and total sales of commercial properties sold.

Although the economic figures released for January and February exceeded expectations, the March figures have started to reflect the impact of stay-at-home orders and travel restrictions around economic centers like the coastal metropolis of Shanghai.

Exports, a key driver of Chinese growth, rose 14.7% more than expected in March, but imports fell unexpectedly, down 0.1% from a year ago. year, according to data released last week.

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“We must coordinate efforts for the prevention and control of Covid-19 and economic and social development, make economic stability our top priority and pursue progress while ensuring stability, and place the task of ensuring stable growth in an even more important position,” the office said. mentioned.

Retail sales rose 3.3% in the first quarter from a year ago, but the apparel, auto and furniture subcategories still posted declines for the period.

Among retail sales, jewelry declined the most and was down 17.9% in March from a year ago. It was followed by a 16.4% drop in foodservice and a 12.7% drop in apparel and footwear, the data showed.

“Although [the] China’s economy will be under pressure in the short term due to pandemic controls, we remain confident in the long-term resilience and vitality of the Chinese economy,” said Monica Li, chief equity officer at Fidelity International, in a statement. a rating.

Among signs of support for longer-term growth, Li noted that “strong local government special bond issuance since the second half of last year has paved the way for accelerating infrastructure investment.” in the future”.


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