China’s economy has started the year on a solid note, recording a 4.5% growth rate in Q1 2023. While industrial production and consumer spending have shown signs of recovery, challenges persist, including a deep downturn in the property industry and rising youth unemployment.
Industrial Production Shows Steady Increase
Key Statistics
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Industrial production increased by 3.9% in March, compared to 2.4% in January-to-February.
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The property industry is mired in a deep downturn, with investment declining 5.8% and sales decreasing by 1.8%.
Experts Weigh In
Quotes from Economists
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Louise Loo, China lead economist for Oxford Economics, said that the consumer-led recovery still has room to run.
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Raymond Yeung, chief economist for Greater China at ANZ Research, believes that China’s economy is deflationary and that adjustments should be made to account for delayed economic activity.
Government Response
Measures to Restore Confidence
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The Chinese government has resorted to surprising measures to restore confidence among private entrepreneurs, but the campaign has inspired more nervousness than optimism.
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The government set a cautious growth plan for this year, with a GDP target of around 5% and a job creation target of 12 million.
Overview
Strong Consumer Spending Drives GDP Growth
- Consumption posted the strongest rebound, with retail sales jumping 10.6% in March and growing 5.8% in January to March.
Private Investment Remains Weak
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Private investment was extremely weak, increasing only 0.6% from January to March.
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State-led investment, on the other hand, advanced 10%.
Youth Unemployment Surges
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The jobless rate for 16- to 24-year-olds hit 19.6% in March, up for a third straight month and the second highest on record.
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A large number of college graduates will be looking for jobs this year, exacerbating the issue.
Growth Rate
The growth rate beat the estimate of 4% growth from a Reuters poll of economists.
Private Investment and Youth Unemployment
Despite the overall economic growth, private investment was weak, with fixed asset investment by the private sector increasing only 0.6% in January-March.
Youth unemployment also surged, reaching 19.6% in March, which is the second-highest level on record.
Industrial Production and Consumer Spending
Industrial production showed a steady increase, with a 3.9% growth rate in March compared to 2.4% in January-February.
Consumer spending also rebounded strongly, with retail sales jumping 10.6% in March from a year earlier, the highest level of growth since June 2021.
Economic Recovery and Challenges
The economic recovery is on track, but challenges persist. The property industry is mired in a deep downturn, with investment declining 5.8% in the first quarter.
Prices of industrial products are still falling, and enterprises are facing difficulties in their profitability.
