China’s Q1 GDP figures better than expected

China’s Q1 GDP figures better than expected

17/04/19

China’s economy performed better-than-expected in Q1, growing at 6.4 per cent, Reuters reportsFigures released by the National Bureau of Statistics exceeded analysts’ predictions, which had estimated growth at 6.3 per cent in the first quarter of 2019.

According to the Financial Times, the uptick was fuelled by positive progress in US-China trade talks and government stimulus measures beginning to take hold.

Beijing has ramped up efforts to boost the economy as it transitions from an industrial, export-led economy to a services-based consumer one – a process which would inherently see economic growth slow.

Policymakers have introduced tax cuts, accelerated construction projects and cut the level of reserves that banks are required to hold, the BBC reports. However, the OECD warned on Tuesday that prolonged stimulus could prove damaging in the medium term, undermining China’s efforts to control debt.

According to Chinese media outlet Caixin, the pickup in growth momentum “will likely reduce the urgency for policymakers to introduce further stimulus,” and indicates that China’s growth is “bottoming out.”

That view isn’t shared among all analysts, though. Bloomberg Economics said they “expect the economy to continue to stabilise in Q2, but believe continued policy support is warranted. Government-led infrastructure spending has kick started the recovery. What’s needed still [is] a turnaround in the private sector to drive self-sustaining growth.”

Jianwei Xu, a senior economist at Natixis Hong Kong, meanwhile, is quoted by Reuters as saying “we need more evidence to call a full-fledged recovery. Our view for the economy is still cautious.”

China’s economic performance is crucial to the world economy, driving markets in Asia and beyond. Much of the predicted global slowdown in 2019 is linked to China’s structural transition challenges, which have been compounded by trade tensions with the US and domestic economic reforms. However, positive retail figures, also released on Wednesday, suggest that consumer confidence is strong. Retail sales for March rose 8.7 per cent on a year earlier, despite concerns that the US-China trade war would lead to caution among consumers.

According to a poll of economists by Reuters, China is expected to see a growth rate of around 6 per cent in 2019 – its slowest pace of expansion in 30 years.