(Reuters) – China’s economic system grew 5.3% within the first quarter year-on-year, official information confirmed on Tuesday, comfortably beating analysts’ expectations, a welcome signal for policymakers as they attempt to shore up demand and confidence within the face of a protracted property disaster.
Analysts polled by Reuters had anticipated first-quarter gross home product (GDP) to develop 4.6% from a yr earlier, in comparison with 5.2% within the earlier three months.
The federal government is aiming for financial progress of round 5.0% for 2024, a goal that many analysts imagine is formidable and will require extra stimulus.
On a quarter-by-quarter foundation, GDP grew 1.6% in January-March, above expectations for a 1.4% rise and in contrast with a revised 1.2% acquire within the earlier quarter.
KEY POINTS
* Q1 GDP +5.3% y/y (f’solid +4.6%, This fall +5.2%)
* Q1 GDP +1.6% q/q s/adj (f’solid +1.4%, This fall +1.2% revised)
* March industrial output +4.5% y/y (f’solid +6.0%, Jan-Feb +7%)
* March retail gross sales +3.1% y/y (f’solid +4.6%, Jan-Feb +5.5%)
* Jan-March fastened asset funding +4.5% y/y (f’solid +4.1%, Jan-Feb +4.2%)
* Jan-March property funding -9.5% y/y (Jan-Feb -9.0%)
MARKET REACTION:
Chinese language shares largely shrugged off the better-than-expected financial progress information, with the blue-chip CSI 300 Index down 0.5% as of 0220 GMT. China’s strengthened barely.
COMMENTARY:
TAO CHUAN, CHIEF MACRO ANALYST, SOOCHOW SECURITIES, BEIJING
“The GDP determine is according to our expectations. The primary-quarter economic system was extra pushed by low-cost industrial manufacturing and exports, or value for quantity. This would be the driver for this yr’s economic system, however might put stress on company earnings in the long term. In the meantime, the hole between actual GDP and nominal GDP has expanded, reflecting that demand-side issues urgently should be resolved.”
RAYMOND YEUNG, CHIEF CHINA ECONOMIST, ANZ, BEIJING
“The current financial restoration has been pushed by exports. I believe it’s a two-speed economic system. Home demand continues to be weak, however exports are good. That is prone to proceed into the second quarter, so the economic system must be comparatively good within the first half. Though with regards to the second, it will depend upon financial insurance policies. If the federal government’s focus shifts again to reform, our estimate on the second half could be comparatively conservative.
“Our forecast is the economic system is on observe to develop greater than 4.5% this yr, however that is nonetheless decrease than the federal government’s forecast of 5%.”
WOEI CHEN HO, ECONOMIST, UOB, SINGAPORE
“I believe (robust headline GDP) was primarily from the January to February increase, whereas the March information largely disenchanted.
“Even the property funding contraction was worse than anticipated… there’s not a lot of an enchancment within the outlook from right here. I believe there’s nonetheless draw back dangers to the economic system. It is fairly clear the property glut continues to be persevering with.
“Chopping rates of interest just isn’t serving to a lot. They’ve boosted liquidity in markets, however what’s lacking is the buyer confidence. Persons are not snug to be spending when the outlook is weak and in addition the property market is continuous to show down – after all the federal government is making an attempt to do extra on the infrastructure aspect, however there’s a restrict to how a lot they will do.”
TONY SYCAMORE, MARKET ANALYST, IG, SYDNEY
“This will likely be quantity to help a continued rebound in Chinese language equities.
“It looks as if sentiment has turned, and I believe this quantity is actually going to make individuals assume additional about what they wish to do with their China fairness holdings… There are clearly political dangers in holding these shares, however if you simply have a look at the numbers, the GDP quantity actually impresses me.
“If you see a GDP beat like that, you’ll be able to’t actually ignore it, and I believe that is one thing that will likely be taken by the market as a ray of shining gentle.”
TORU NISHIHAMA, DAI-ICHI LIFE RESEARCH INSTITUTE, CHIEF ECONOMIST, TOKYO
“The GDP information made it clear that weak consumption and powerful manufacturing might pave the best way for the Chinese language economic system to slip deeper into deflation going ahead.
“So long as China continues to rely closely on the property market, significantly in rural areas, the real-estate market would maintain a drag on the Chinese language economic system.
“Help for family consumption and job creation among the many youth maintain the important thing to a balanced progress, however proper now it is exhausting to see Chinese language authorities are attempting to shift focus in direction of these areas.”
JEFF NG, HEAD OF ASIA MACRO STRATEGY, SMBC, SINGAPORE
“The result’s constructive for the economic system to hit its goal. Momentum seems to be secure for now, evidenced by the March information not shocking on the upside.
“I believe sentiments are nonetheless leaning bearish, I am anticipating some reversal, presumably from the final quarter of 2024.”
ALVIN TAN, HEAD OF ASIA FX STRATEGY, RBC CAPITAL MARKETS, SINGAPORE
“On the face of it, the headline quantity appears to be like good… however I believe the momentum is definitely fairly weak on the finish. It principally appears to be like fairly front-loaded, the power within the economic system. Entrance-loaded within the January-February level, which is principally the Chinese language New 12 months, if you consider it. And primarily, it type of weakened from there.”
BACKGROUND
* China’s economic system has struggled to mount a robust and sustainable post-COVID bounce, burdened by a protracted property downturn, mounting native authorities money owed and weak private-sector spending.
* The world’s second-biggest economic system is predicted to develop at a 4.6% tempo in 2024 year-on-year, based on a Reuters ballot, falling wanting the official goal of round 5.0%.
* China has unveiled fiscal and financial coverage measures in a bid to attain what analysts have described as an formidable 2024 progress goal, noting that final yr’s progress fee of 5.2% was possible flattered by a comparability with a COVID-hit 2022.
* The federal government is drawing on infrastructure work – a well-used playbook – to assist carry the economic system as customers are cautious of spending and companies lack confidence to develop.
* Fitch reduce its outlook on China’s sovereign credit standing to detrimental final week, citing dangers to public funds as Beijing channels extra spending in direction of infrastructure and high-tech manufacturing, amid a shift away from the property sector.
