GDP growth of 18.3% year-on-year in the first quarter was the strongest since China began keeping records in 1992, and was driven by a surge in retail sales, industrial production and investment in fixed assets.
The big jump reflects the deep slump in activity in early 2020 but it keeps China on track for growth of between 8% and 9% in 2021, economists said, far ahead of the Chinese government’s official target of more than 6%.
“We are fully confident that we can maintain the current recovery momentum throughout the year,” said Liu Aihua, a spokeswoman for the National Bureau of Statistics at a press conference in Beijing on Friday.
First quarter retail sales jumped 34% from a year ago, while fixed-asset investment in urban areas gained nearly 26%. Industrial production increased by more than 24%.
“Growth remains pretty strong at this stage as Covid losers such as consumption and [capital expenditures] are catching up,” said Larry Hu, chief China economist for Macquarie Group, in a research report on Friday.
Retail sales, which took a big hit last year because of the lockdown, had improved because Beijing eased travel restrictions after the Lunar New Year holidays in February, he added. Investments in manufacturing and infrastructure also picked up pace.
Trade also provided a strong boost. Customs statistics released earlier this week showed imports jumped more than 38% last month in US dollar terms compared to a year earlier, a sign that demand within China is picking up. Exports grew by nearly 31%.
Hu said the strength in imports was broad based, indicating a “consumption recovery.” And Beijing should easily hit its target of more than 6% growth for 2021. “Growth could easily go to 8-9% with the low base,” Hu added.
Nomura analysts predicted Friday that China’s GDP would grow 8.9% in 2021.
Last month, Premier Li Keqiang said the government had set this year’s growth target at “above 6%.” That’s more than enough to accomplish President Xi Jinping’s long-term goal for the economy, though still less aggressive than some observers have said they would like to see. Some analysts have said the cautious target indicates that the government is taking account of the risk that Covid-19 makes a comeback.
Earlier this month, the International Monetary Fund raised its growth estimate for China to 8.4% for this year, saying that “effective containment measures, a forceful public investment response and central bank liquidity support” had facilitated the country’s recovery.
Recovery ‘leveling off’
But some analysts say the outlook for the rest of this year is less certain.
Chaoping Zhu, global market strategist for JP Morgan Asset Management, said quarter-over-quarter growth is a better indicator of the current strength of the Chinese economy.
GDP grew by just 0.6% compared with the final quarter of 2020. That’s the slowest pace since China began its recovery from the pandemic. In the first quarter of last year, the economy shrank a record 9.7% from the previous quarter, before bouncing back as the government eased restrictions. From the second to fourth quarters of 2020, the economy grew by 11.6%, 3%, and 2.6% respectively, quarter on quarter.
“It shows that the Chinese economy has already normalized,” Zhu wrote in a note on Friday.
Julian Evans-Pritchard, senior China economist for Capital Economics, also pointed out that the 18.3% surge is largely distorted by low base effects.
“This tells us little about the economy’s current momentum, however, since it reflects a much weaker base for comparison from last year’s Covid-19 downturn,” he said. “With the economy already above its pre-virus trend and policy support being withdrawn, China’s post-Covid rebound is leveling off.”