It is the first portrait since 2019 of a Chinese economy free of the severe restrictions that allowed it to keep the coronavirus in check, but which hit businesses and supply chains.
Investors were closely watching first-quarter data for clues about the strength of the recovery after Beijing lifted Covid restrictions in December and eased a three-year crackdown on technology companies and real estate.
“On net, China’s first quarter numbers have been decent, keeping them on track for their growth target of around 5% this year,” said Matt Simpson, a market analyst at City Index.
So far, China’s recovery has been uneven: consumption, services and infrastructure spending have rebounded, but slowing prices and rising bank savings have cast doubt on demand.
The NSO report noted that in the first three months of the year, China faced a “grave and complex international environment, as well as arduous tasks to promote reform, development and ensure stability at home.”
The zero covid policy imposed by Beijing -based on strict quarantines and confinements, massive tests and movement restrictions- disrupted economic activity until it was dismantled in December.
Since then, the Chinese population has returned to restaurants and travel again, giving an urgent boost to the service sector.
Teewe Mevissen, an analyst at Rabobank, noted that “consumption recovered in the first quarter partly due to pent-up demand, but is still not up to pre-pandemic levels.”
“The drop in household wealth due to the real estate crisis and the loss of household income during the pandemic are factors why consumers have not spent more,” he added.
In turn, Iris Pang, chief economist for China at ING, pointed out that the main reason for the higher-than-expected growth in the first quarter is the strong expansion of retail sales.
In 2022, China’s GDP grew just 3%, one of its worst performances in decades.
The world’s second largest economy also faces another series of challenges, such as high debt in the real estate sector, falling consumer confidence or inflation, and the threat of global recession.
With information from AFP and Reuters
