China's economy grows faster than expected

Drivers and challenges to growth

Contrary to previous predictions when experts said it would still stagnate, the figures just announced by authorities caused a big surprise, as they all "broke" the expected milestones that the market had set.

Specifically, in the first quarter, the GDP of the world's second largest economy grew by 5.3% over the same period last year, while the quarterly growth rate reached 1.6%, continuing to increase significantly compared to the fourth quarter of 2023. These positive figures are also better consolidating the realization of the 5% GDP growth target of the world's second largest economy this year.

Looking at the stock market reaction this morning, positive data on China's economic growth was not enough to push the stock market up, as investors remained concerned about developments in the Middle East.

Even the major indices in the region fell quite deeply this morning. Leading the decline were South Korea's Kospi and Japan's Nikkei 225, which both fell more than 2%. Last night, the Japanese yen officially hit its lowest exchange rate in more than 34 years against the US dollar, when it surpassed 154 yen to 1 USD. In mainland Chinese markets, the main indexes in Shanghai and Shenzhen fell nearly 1.5%.

GDP data shows China's economy grew faster than expected.

Many experts believe that GDP in the first quarter reached 29.63 trillion yuan, equivalent to 4.09 trillion USD, up 5.3% over the same period last year - higher than expected. This is thanks to growth in exports and the manufacturing sector. It is the foundation signaling a more stable economic recovery in the following quarters. Key indicators such as value-added industrial output and retail sales both increased optimistically, up 6.1% and 4.7%, respectively. Cheap capital injections to push capital into the manufacturing sector, especially the two new energy sectors and digitalization of the economy, have had a clearer effect. The Asian Development Bank (ADB) adjusted China's growth forecast to 4.8% this year, 0.3% higher than its previous estimate. Morgan Stanley also raised China's GDP forecast for 2024 from 4.2% to 4.8%. However, all of these figures are about 5% lower than China's target, showing that maintaining the same growth rate as in 2023 is a formidable task.

Robin Xing, chief China economist at Morgan Stanley, forecasts a 5.5% increase in the second quarter. The economist believes that exports will remain the main positive factor for China's growth this year due to a recovery in global demand, especially greater demand from the US market. Although key indicators have improved significantly, many experts warn that the world's second-largest economy is still facing pressure from weak domestic demand and a weak real estate sector. Not to mention the complicated geopolitical situation, new tensions in the Middle East, and the risk of disruptions in the supply chain of goods from Panama and the Red Sea. Risk of surplus goods. US-China strategic competition.

China is implementing a series of measures to stimulate consumption of technology goods and open up to attract foreign tourists. But it seems that is not enough, many experts expect that China will further increase fiscal spending not only on production but also on many social security areas such as health,education , and culture to restore consumer confidence, and strengthen reforms to increase business confidence.

Comments on the economic recovery

GDP data showed China’s economy grew faster than expected, which will come as a relief to officials as the government tries to boost growth amid a sluggish property sector and rising local government debt.

This is a bright spot. The world’s second-largest economy has struggled to achieve a strong and sustainable recovery in the wake of the COVID-19 pandemic. And just ahead of the GDP figures, experts were optimistic about the outlook for China’s economy. Especially with the manufacturing sector being a key driver.

Mr. Zhu HaiBin - Chief Economist, JPMorgan China Company commented: "The positive results in the first quarter are mainly due to the manufacturing industry. On the one hand, the growth is associated with high-tech investment. On the other hand, it is also related to innovation investment activities in traditional manufacturing industries".

Besides, experts believe that China's economy will have good momentum in the second quarter, especially in the import-export sector.

"In the second quarter, China's exports and imports are expected to continue to improve. The first half of the year is basically still in the growth channel," said Wang LingJun, Deputy Director General of the General Administration of Customs of China.

Despite some positive signs, China's economy will still need more stimulus from the government to reach its 5% growth target for 2024. Analysts predict that in the third quarter, the People's Bank of China (PBOC) will continue to cut the reserve requirement ratio by another 0.25 percentage points, bringing the total cut to the largest in the past two years, to support the economy.

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Source: https://baolaocai.vn/kinh-te-trung-quoc-tang-truong-vuot-du-bao-post382942.html