China’s economy soared in the first quarter as consumer spending strengthened, joining production and investment in recovering from the Covid slump a year ago.
Gross domestic product climbed a record 18.3% in the first quarter from a year earlier, largely in line with the 18.5% predicted in a Bloomberg survey of economists. The figures are skewed by comparisons from a year ago when the economy was in lockdown. A better reading of the economy’s momentum comes from quarter-on-quarter growth, which slowed to 0.6% from a previously reported 2.6% in the previous three months.
Based on two-year average growth, GDP rose 5% in the quarter, while infrastructure investment was up 2.3%. Retail sales were up 6.3% in March on a two-year average basis
China’s economy steadily picked up pace after an historic contraction in the first quarter of last year, recovering all its lost ground by the end of September. The rebound has been led by strong industrial output and robust exports as the pandemic fuelled demand for Chinese-made medical goods and electronic devices.
Slump and rebound
“We are seeing a bit more balanced recovery in the Chinese economy,” Wang Tao, chief China economist at UBS , said in an interview with Bloomberg TV. As policy starts to normalise, property and infrastructure investment are set to slow in the next few quarters, she said. “So that early pickup in construction industry is going to give way to more household consumption,” she said.
China’s benchmark CSI 300 Index erased an earlier loss of as much as 0.6%. China’s 10-year government bond futures also reversed earlier losses to rise as much as 0.1% while the yield on benchmark 10-year sovereign debt fell one basis point to 3.165%. The onshore yuan lost 0.17%, the first drop this week, to 6.5329 per dollar.
Bumper GDP growth, rising inflation and soaring debt levels have put policy makers on guard. Beijing has signalled it wants to scale back fiscal and monetary stimulus now that the recovery is gathering pace, and is tightening regulatory oversight in areas such as lending and real estate.l The central bank has asked banks to curtail loan growth in coming months, though officials have stressed a gradual tapering of policy.
Globally, the rollout of vaccines is helping to bolster the world economy and underpinning China’s growth. On top of that, the Biden administration’s massive fiscal stimulus is expected to have huge spillovers for the rest of the world, especially in China, the world’s biggest exporter. Bloomberg Economics’ Chang Shu upgraded her growth forecast for China for this year to 9.3% from 8.2% previously. The government’s official target is for growth above 6% this year.
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