China’s economy expanded by 4.5% in Q1, comfortably beating the 4% growth rate expected by economists. The rebound was led by increased infrastructure investment, strong exports, rising property prices, and the biggest monthly gain in retail sales (+10.6%) since June 2021.
China’s consumers, while wary of big-ticket purchases like cars or apartments, are spending again. Many factories are still running below capacity, but exports are strengthening. Even as construction of new housing is slowing, investment in infrastructure and manufacturing is robust.
Despite lingering pockets of economic weakness, China is recovering faster than expected after the government in early December lifted “Zero Covid” measures like shutdowns that had choked growth.
However, the latest data does reveal weakness in real estate construction, private investments, and wage growth. The contraction in property investment worsened to 5.8% in March. That’s a worry because housing fuels so much demand for raw materials. Nevertheless, it looks likely that China will meet or exceed its 5% GDP growth target for 2023.
The stakes for the rest of the world are high. For most of the past two decades, China has been the single largest engine of global growth. Despite tensions with the United States, and disagreements with Europe, China remains highly interdependent with both of their economies at an uneasy time. The International Monetary Fund (IMF) warned recently that the world faces an increasing risk of a painful slowdown this year as central bankers in the West raise interest rates and banks stumble.
The IMF predicts that over the next 5 years (2023-2028), China will contribute 22.6% of total world economic growth.
Source: The Daily Edge
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