China’s Economy Grows Faster Than Expected in Q1

China’s GDP Growth Surpasses Economist Expectations

China’s National Bureau of Statistics released official data on Tuesday, revealing that the country’s economy grew faster than expected in the first quarter of 2024. The gross domestic product (GDP) in the January to March period expanded by 5.3% compared to the same period last year. Economists polled by Reuters had expected a growth rate of 4.6%, making this unexpected acceleration a positive sign for China’s economic recovery. The fourth quarter of 2023 had witnessed a growth rate of 5.2%.

Quarter-on-Quarter Growth and Future Targets

On a quarter-on-quarter basis, China’s GDP grew by 1.6% in the first quarter, surpassing expectations from a Reuters poll which predicted a growth rate of 1.4%. The results also demonstrate an improvement from the revised fourth quarter GDP growth of 1.2%. This upward trend aligns with China’s aim to achieve a growth target of about 5% in 2024, as stated by the Chinese government.

Optimistic Forecasts for China’s Economy

Reputable financial institutions such as Morgan Stanley have revised their GDP forecasts for China upwards, indicating an optimistic outlook for the country’s economic growth. Morgan Stanley recently raised its 2024 real GDP forecast for China to 4.8%, surpassing its previous estimate of 4.2%. This adjustment reflects growing confidence in China’s economic trajectory.

Challenges and Weaknesses in China’s Economy

Despite the overall growth, China’s recent export and inflation data have shown weakness. Both data sets fell short of expectations, casting some doubts on the robustness of China’s economic recovery. China’s industrial output for March grew by 4.5% year-on-year, below expectations of 6%, while retail sales grew by 3.1% year-on-year, failing to meet the projected growth rate of 4.6%.

Unemployment Rate and Currency Impact

On a positive note, the unemployment rate in major Chinese cities slightly decreased to 5.2%, breaking a three-month streak of increases and confirming signs of improving labor market conditions. The offshore yuan slightly strengthened following the data release, retreating from its five-month high reached earlier in the day to trade at 7.2724 against the USD.

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