Surprise Growth: China’s Economy Defies Expectations with 5.3% Annual Pace in Q1, But Uncertainty Lingers for Second Quarter

Despite the challenges posed by the COVID-19 pandemic, China’s economy has shown resilience in the first quarter. Official data revealed that the world’s second-largest economy grew at a 5.3% annual pace in January-March, surpassing analysts’ forecasts of around 4.8%. The positive data for the first quarter comes after recent reports of a decline in import and export figures for March, as well as a slowdown in inflation.

The economy’s performance was boosted by strong industrial output, growing retail sales, and increased fixed investment. However, there are concerns about weakness in March activity indicators and unpredictable external demand conditions. Factors such as a slowdown in demand and a property crisis had previously weighed on growth.

China economist Louise Loo of Oxford Economics highlighted potential challenges for the second quarter, including the unwinding of excess inventory, normalization of household spending post-holidays, and cautious stimulus measures. Policymakers in Beijing have introduced fiscal and monetary policy measures to boost the economy, with an ambitious GDP growth target of 5% for 2024.