China’s Economy Grows By 4.5% in Q1

Facts

• China's National Bureau of Statistics on Tuesday reported that the country's GDP grew by 4.5% in the first quarter. The growth is the highest since the first quarter of last year and beat expectations of a 4% rise. The economy expanded 2.2% quarter-on-quarter.¹
• While this figure falls slightly short of Beijing's 5% growth target for this year, it indicates that the world's second-largest economy is picking up pace after zero-COVID measures were scrapped.²
• China’s consumer economy showed signs of a turnaround, with retail sales rising 10.6% year-on-year in March, marking the biggest increase in almost two years. Industrial production grew by 3.9%, reaching a five-month high.³
• Official data also showed that fixed-asset investment increased 5.1% year-on-year in Q1, while investment rose by 16% in high-tech industries and by 51.5% in e-commerce services. The news comes amid China's launch of a digital economy and high-tech transformation.⁴
• Yet, authorities have warned that China is likely to face import and export pressures in the coming months due to an uncertain international economic environment and inadequate domestic market demand.⁵
• As the Chinese economy gains momentum, international organizations and investment banks have upgraded their forecasts for economic growth this year. The IMF said last week that China is rebounding strongly from a period of economic reforms and will grow by 5.2% and 5.1% in 2023 and 2024, respectively.⁶

Sources: ¹CNBC, ²Al Jazeera, ³Guardian, ⁴Global Times, ⁵Associated Press, and ⁶CNN.

Narratives

• Narrative A, as provided by New York Times. For most of the past two decades, China has been the single largest engine of global growth. After experiencing one of its worst economic performances in years in 2022, it's recovering faster than expected, and Tuesday’s report on 4.5% GDP growth indicates that China — the world's second-largest economy — is coming back to life.
• Narrative B, as provided by Wall Street Journal. China is likely to see a powerful economic recovery, driven primarily by growth in its service industries. However, the rest of the world will not benefit much because China's rebound is focused more on domestic consumption than on exports as in previous cycles — the US economy in particular will likely not feel any positive effect at all. Instead, there is a high risk that China's reopening will add pressure on global energy prices and raise inflationary pressures.

Predictions