Zürcher Nachrichten - China's economic growth jumps 4.5% in Q1 after zero-Covid scrapped

The figures were the first snapshot since 2019 of the world's second-largest economy unencumbered by the strict health measures that helped keep the coronavirus in check but battered businesses and supply chains.

A key driver of the standout reading was a bounce in retail sales, the main indicator of household consumption, which surged 10.6 percent on-year in March, the biggest increase since June 2021.

However, industrial production climbed 3.9 percent last month, an improvement from January-February but below analysts' expectations of 4.4 percent, according to data published by the National Bureau of Statistics (NBS).

Tuesday's NBS report said in the first three months of the year China had faced a "grave and complex international environment as well as arduous tasks to advance reform, development and ensure stability at home".

Beijing's virus-containment policy -- an unstinting regime of strict quarantines, mass testing and travel curbs -- strongly constrained normal economic activity before it was abruptly ditched in December.

The Chinese economy is also beset by a series of other crises, from a debt-laden property sector to flagging consumer confidence, global inflation, the threat of recession elsewhere, and geopolitical tensions with the United States.

Since the rapid dismantling of the suffocating zero-Covid policy, Chinese people have in recent months returned to restaurants and started to travel again, giving much-needed stimulus to services.

- Modest growth target -

"Consumption saw a recovery during the first quarter partly because of pent-up demand but is not yet back on pre-pandemic levels," Teeuwe Mevissen, an analyst at RaboBank, said.

"Loss in household wealth due to the real estate crisis and loss of household income during the pandemic are factors why consumers have not spent more."

And Iris Pang, the chief economist for Greater China at ING, said the primary reason for the faster-than-expected growth was the much stronger growth in retail sales, which were "mainly boosted by catering".

The official January-to-March growth figure was significantly higher than the 3.8 percent predicted by analysts in an AFP poll.

China's economy grew just three percent in the whole of last year, one of its weakest performances in decades.

It posted a 4.8 percent expansion in the first quarter of 2022, though that slowed to just 2.9 percent in the final three months of the year.

The government has set a comparatively modest growth target of around five percent this year, a goal the country's Premier Li Qiang has warned could be hard to achieve.

An AFP poll of analysts predicted that the Chinese economy would grow by an average of 5.3 percent this year, roughly in line with the International Monetary Fund's 5.2 percent forecast.

Still, experts have warned that wider global trends could yet weigh on China's recovery.

Ken Cheung at Mizuho Bank said domestic consumption "proved to be the pillar" behind the economic improvement, but "industrial production was disappointing given the strong rebound in exports growth".

He added it will "take time for business confidence recovery, which requires translating the credit expansion into money flow to support real economic activities".

X.Blaser--NZN