China GDP: Economy shakes off Covid legacy to grow 4.5% in Q1

Hong Kong
CNN
 — 

China’s economy got off to a solid start in 2023, as consumers went on a spending spree after three years of strict pandemic restrictions ended.

Gross domestic product grew by 4.5% in the first quarter from a year ago, according to the National Bureau of Statistics on Tuesday. That beat the estimate of 4% growth from a Reuters poll of economists.

But private investment barely budged and youth unemployment surged to the second highest level on record, indicating the country’s private sector employers are still wary about longer term prospects.

Consumption posted the strongest rebound. Retail sales jumped 10.6% in March from a year earlier, the highest level of growth since June 2021. In the January to March months, retail sales grew 5.8%, mainly lifted by a surge in revenue from the catering service industry.

“The combination of a steady uptick in consumer confidence as well as the still-incomplete release of pent-up demand suggest to us that the consumer-led recovery still has room to run,” said Louise Loo, China lead economist for Oxford Economics.

Industrial production also showed a steady increase. It was up 3.9% in March, compared with 2.4% in the January-to-February period. (China usually combines its economic data for January and February to account for the impact of the Lunar New Year holiday.)

Last year, GDP expanded by just 3%, badly missing the official growth target of “around 5.5%,” as Beijing’s approach to stamping out the coronavirus wreaked havoc on supply chains and hammered consumer spending.

After mass street protests gripped the country and local governments ran out of cash to pay huge Covid bills, authorities finally scrapped the zero-Covid policy in December. Following a brief period of disruption due to a Covid surge, the economy has started showing signs of recovery.

Last month, an official gauge of non-manufacturing activity jumped to its highest level in more than a decade, suggesting the country’s crucial services sector was benefiting from a resurgence in consumer spending after the end of pandemic restrictions.

As the economic recovery gains traction, investment banks and international organizations have upgraded China’s growth forecasts for this year. In…