China’s economy outpaces expectations in first Quarter

• The country’s second-largest economy exceeded forecasts, reaching 4.6% in Q1.
• Beijing set an ambitious annual growth target of “around 5%.”
• Retail sales growth declined to 3.1%, indicating a decline in consumer confidence.

Even as the crisis in its property sector deepened, China’s economy surged stronger than expected at the start of the year. Official data reveals a 5.3% expansion in gross domestic product (GDP) in the first three months of 2024 compared to the previous year.

Surpassing forecasts, the world’s second-largest economy, China, exceeded expectations of a growth slowdown to 4.6% in the first quarter. Beijing, last month, established an ambitious annual growth target of “around 5%” for the economy. Data from the National Bureau of Statistics (NBS) additionally indicated a decline in first-quarter retail sales growth, a crucial measure of China’s consumer confidence, to 3.1%.

“You cannot manufacture growth forever so we need to see households come to the party if China wants to hit that around 5% growth target,” Harry Murphy Cruise from Moody’s Analytics told the news.

During the same period, property investment experienced a significant 9.5% decline, underscoring the challenges confronted by China’s real estate firms. These figures emerge amidst China’s ongoing struggle with a property market crisis.

The International Monetary Fund (IMF) estimates that the sector contributes approximately 20% to the economy. Additionally, the latest data revealed that new home prices plunged at the quickest rate in over eight years in March.

In January, a court in Hong Kong issued an order to liquidate the property giant Evergrande, bringing attention to the crisis in the real estate industry.

Rival developers Country Garden and Shimao have also faced winding-up petitions in the city. Just last week, credit ratings agency Fitch revised its outlook for China, citing growing risks to the country’s finances amidst economic challenges.

During the annual gathering of China’s leaders in March, officials reported that the economy had grown by 5.2% in 2023. For decades, the Chinese economy experienced stellar expansion, with official figures indicating that its GDP grew at an average rate of close to 10% per year.

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