China’s GDP grew faster than expected in Q1 2024
China’s economy grew more strongly than expected in the first quarter of 2024, leading to calls from economists for more policy stimulus to consolidate the recovery.
China’s GDP grew 5.3% year-on-year in the first quarter of this year, data from the National Bureau of Statistics (NBS) showed.
Officials and analysts said that policymakers are expected to introduce more supportive measures for the development of the real economy and to restore consumer confidence and address problems in the property. Possible moves include increasing support for emerging industries, as well as support for completing unfinished pre-sold homes and allocating more resources to support household spending, they said.
Projections show China’s GDP growth could accelerate in the second quarter, given the low comparison base. However, analysts said that strong stimulus efforts must continue, including continued fiscal and monetary support in the coming months.
Sheng Laiyun, deputy head of the NBS, said the strong economic performance in the first quarter was driven by improvement in industry and services.
NBS data showed China’s value-added industrial output grew 6.1% year-on-year in the first quarter, after a 4.6% annual growth in 2023. Fixed-asset investment rose 4.5% in the first three months year-on-year, while retail sales grew 4.7% during the same period.
Sheng said that “the economy will continue the recovery trend, underpinned by global economic recovery, stepped-up policy support and the anticipated strong holiday business”.
He added that more efforts will be made to increase support for the development of the real economy, fostering emerging industries and boosting consumer confidence.
However Lu Ting, chief China economist at Nomura, said that while China’s first-quarter real GDP growth beat expectations, March activity data was well below expectations.
“Activity data may drop further from March on weak momentum,” Lu said. “Some sectors, especially exports, may hold up relatively well on falling prices and robust external demand.”
On the downside, China’s economy is affected by the downturn in its property sector, the International Monetary Fund reported in its latest World Economic Outlook. The IMF estimated that China will grow at 4.6% this year, unchanged from the previous forecast in January.
Louise Loo, lead economist at British think tank Oxford Economics, said she expected government bond issuance to pick up again in the third quarter.
Despite the fluctuations in March, Zhou Maohua, a researcher at China Everbright Bank, said he believes the economy is well on track to a steady recovery in the upcoming months, given the continued recovery in industrial production and investment and the gradual improvement in consumption.
He said that China “still has ample policy space to bolster the world’s second-largest economy”.
On the monetary front, Huang Yiping, dean of Peking University’s National School of Development, said the US Federal Reserve might cut the policy rate this year, which “should also create more room for the People’s Bank of China to ease monetary policy if it wants to”.
In light of the GDP figures, Goldman Sachs raised its outlook for China’s economic growth this year to 5%, up from its previous prediction of 4.8%.
And the Asian Development Bank (ADB) has revised its growth forecast upwards for China to 4.8% this year, 0.3 percentage points higher than the estimate made in December.
SMEs enjoy buoyant first quarter
One area of the economy that reported strong growth in the first three months of this year was China’s small and medium-sized enterprises (SME) sector, which reported stronger business performance, an industry index showed.
The Small and Medium Enterprises Development Index, based on a survey of 3,000 SMEs from eight major industries, came in at 89.3 in the first quarter, up 0.2 points from the previous quarter, the China Association of Small and Medium Enterprises said.