Chinese GDP Q1 2021: The economy grows by a record 18.3% in the first quarter

China wins global economic recovery

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The 18.3% year-on-year GDP growth in the first quarter was the strongest since China started keeping records in 1992, and was led by a retail, industrial production and capital investment.

The big jump reflects the sharp drop in activity at the start of 2020, but it keeps China on track for 8% to 9% growth in 2021, according to economists, far ahead of the Chinese government. official target of more than 6%.

“We are fully convinced that we can maintain the current momentum of recovery throughout the year,” said Liu Aihua, spokesperson for the National Bureau of Statistics. at a press conference in Beijing on Friday.

First-quarter retail sales jumped 34% from a year ago, while capital investment in urban areas grew nearly 26%. Industrial production increased by more than 24%.

“Growth remains quite strong at this stage as the losers of Covid such as consumption and [capital expenditures] are catching up, ”Larry Hu, chief China economist for Macquarie Group, said in a research report on Friday.
Retail sales, which were hit hard last year due to the lockdown, improved because Beijing eased travel restrictions after the Lunar New Year holiday in February, he added. Investments in manufacturing and infrastructure have also accelerated.

Trade has also provided a strong boost. Customs statistics released earlier this week showed imports jumped more than 38% last month in US dollars from a year earlier, a sign that demand in China is picking up. Exports increased by almost 31%.

Hu said the strength of imports was widespread, indicating a “recovery in consumption.” And Beijing should easily meet its growth target of over 6% for 2021. “Growth could easily reach 8-9% with the base low,” Hu added.

Nomura analysts predicted on Friday that China’s GDP would grow 8.9% in 2021.

Last month, Premier Li Keqiang said the government had set this year’s growth target at “over 6 percent.” That’s more than enough to meet President Xi Jinping’s long-term goal for the economy, though still less aggressive than some observers have said they would like to see. Some analysts have said the conservative target indicates the government is factoring in the risk of Covid-19 making a comeback.

Earlier this month, the International Monetary Fund raised its growth estimate for China to 8.4% for this year, saying that “effective containment measures, a strong public investment response and liquidity support of the central bank ”had facilitated the country’s recovery.

Recovery “stabilizing”

But some analysts say the outlook for the rest of the year is less certain.

Chaoping Zhu, global market strategist for JP Morgan Asset Management, said quarter-over-quarter growth was a better indicator of the current strength of the Chinese economy.

GDP grew only 0.6% from the last quarter of 2020. This is the slowest pace since China began its exit from the pandemic. In the first quarter of last year, the economy shrank a record 9.7% from the previous quarter, before rebounding when the government eased restrictions. From the second to the fourth quarter of 2020, the economy grew by 11.6%, 3% and 2.6% respectively, quarter after quarter.

“This shows that the Chinese economy has already normalized,” Zhu wrote in a note on Friday.

Julian Evans-Pritchard, senior Chinese economist for Capital Economics, also pointed out that the 18.3% increase is largely skewed by weak base effects.

“This tells us little about the current dynamics of the economy, as it reflects a much lower baseline compared to last year’s Covid-19 slowdown,” he said. “With the economy already above its pre-virus trend and political support withdrawing, China’s post-Covid rebound is stabilizing. “

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