China’s economy is growing one year after the pandemic subsided

Photographer: Qilai Shen / Bloomberg

China’s economy grew in the first quarter as consumer spending strengthened, joining production and investment in the recovery from the Covid crisis a year ago.

Gross domestic product climbed a record 18.3% in the first quarter compared to a year earlier, largely in line with the 18.5% predicted in a Bloomberg survey conducted by economists. The figures are distorted by comparisons a year ago, when the economy was stalled. A better reading of the economic momentum comes from quarterly growth, which has slowed to 0.6% from 2.6% in the last three months.

Other key landmarks

Industrial production rose 14.1% in March from a year earlier, compared to economists’ median projection of 18% Retail sales expanded 34.2% in March, beating expectations of a 28% gain Investments in fixed assets increased by 25.6% in the first quarter compared to a year ago The unemployment rate was 5.3% at the end of March Based on the two-year average growth, GDP grew by 5% in the same quarter, while infrastructure investment grew by 2.3%. Retail sales rose 6.3% in March, averaging two years

China’s economy has grown steadily after a historic contraction in the first quarter of last year, regaining all its lost ground by the end of September. The recovery was driven by strong industrial production and robust exports, as the pandemic fueled demand for medical products and electronic devices made in China.

Slump and Rebound

The expected rise in growth is the mirror image of last year’s recession

Source: National Bureau of Statistics

“We see a slightly more balanced recovery in the Chinese economy,” said Wang Tao, chief economist in China. UBS AG, said in an interview with Bloomberg TV. As policy begins to normalize, investment in property and infrastructure will slow in the coming quarters, she said. “So the early takeover of the construction industry will lead to higher household consumption,” she said.

China’s CSI 300 benchmark erased a previous loss of up to 0.6%. China’s 10-year government bond futures spending also reversed previous losses to rise to 0.1%, while 10-year sovereign debt yields fell one basis point to 3.165% . The terrestrial yuan lost 0.17%, the first drop this week to 6.5329 per dollar.

Rapid GDP growth, rising inflation and rising debt levels have alerted policy makers. Beijing has said it wants to cut fiscal and monetary stimulus now that the recovery is growing, and is worsening regulatory oversight in areas such as lending and real estate. The central bank has urged banks to reduce lending in the coming months, although officials have pointed to a gradual reduction in policy.

Globally, the launch of vaccines is helping to strengthen the world economy and underpin China’s growth. Moreover, the Biden administration’s massive fiscal stimulus is expected to have huge impacts for the rest of the world, especially in China, the world’s largest exporter. Bloomberg Economics’ Chang Shu has improved it growth forecast for China for this year at 9.3% compared to 8.2% previously. Of the government the official goal is to increase over 6% this year.

– With the assistance of James Mayger, Lin Zhu, Lianting Tu, Livia Yap and Catherine Ngai

(Updates with comments from the economist and the market reaction.)