Beijing’s economic performance is strong on paper, with the first-quarter growth of 5.3% exceeding expectations and the government’s target of around 5%. However, the reality faced by households, companies, and even tax collectors paints a less rosy picture. According to a survey by China’s central bank, only 9.5% of respondents saw good job prospects by the end of 2023.
In response to uncertainties, households in China have been saving more, resulting in an increase of 8.6 trillion yuan ($1.2 trillion) in savings during the first quarter. This has led some banks to stop offering long-term fixed-income products to protect their margins. The market downturn is evident in the CSI 2000 Index, which is down 20% for the year, particularly affecting small-cap companies sensitive to business cycles.
Furthermore, government fiscal revenue decreased by 2.3% from a year ago as of February, indicating that while China’s GDP growth may be robust, there are underlying issues affecting various sectors of the economy. These indicators suggest that despite Beijing’s optimistic outlook on the surface, there are significant challenges facing China’s economy in the near term.