The Chinese economy is growing at a record high a year after a pandemic crisis

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The production line at the plant of Tianneng Battery Group Co. in Huzhou, Zhejiang Province on April 14.

Photographer: Qilai Shen / Bloomberg

Photographer: Qilai Shen / Bloomberg

The Chinese economy soared in the first quarter as consumer spending soared, with manufacturing and investment converging to recover from the Covid slump a year ago.

Gross domestic product was up 18.3% in the first quarter from a year earlier, largely in line with the 18.5% predicted in a Bloomberg poll of economists. The numbers are skewed by comparisons from a year ago, when the economy crashed. A better picture of the momentum of the economy comes from quarter-on-quarter growth, which slowed from 2.6% to 0.6% in the previous three months.

Other important highlights
  • Industrial production increased 14.1% in March from a year earlier, compared to economists’ median projection of 18%
  • Retail sales were up 34.2% in March, exceeding expectations of a 28% gain
  • Investments in fixed assets increased by 25.6% in the first quarter compared to a year ago
  • At the end of March, the unemployment rate was 5.3%
  • Based on the average growth over two years, GDP grew by 5% in the quarter, while investment in infrastructure increased by 2.3%. Retail sales were up 6.3% on an average of two years in March

The Chinese economy steadily accelerated after a historic contraction in the first quarter of last year and recovered all its lost ground at the end of September. The recovery was led by strong industrial production and robust exports as the pandemic fueled demand for Chinese medical supplies and electronic devices.

Collapse and rebound

The expected increase in growth is a mirror image of last year’s slump

Source: National Bureau of Statistics


“We see a slightly more balanced recovery in the Chinese economy,” said Wang Tao, chief economist of China UBS AG, said in an interview with Bloomberg TV. As policies begin to normalize, real estate and infrastructure investment will slow in the coming quarters, she said. “So that early use in the construction industry will give way to more household consumption,” she said.

China’s benchmark CSI 300 Index erased an earlier loss of no less than 0.6%. China’s 10-year government bond futures were also able to reverse previous losses to 0.1%, while the yield on 10-year government bond debt fell a basis point to 3.165%. The onshore yuan fell 0.17%, the first drop this week, to 6.5329 per dollar.

Strong GDP growth, rising inflation and rising debt levels have put policymakers on their guard. Beijing has indicated its intention to scale back fiscal and monetary stimulus as the recovery accelerates and regulatory scrutiny in areas such as credit and real estate tightens. The central bank has asked banks to curtail credit growth in the coming months, although officials have pointed to a gradual winding down of the policy.

Globally, the introduction of vaccines contributes to strengthening the global economy and supporting China’s growth. In addition, the massive fiscal stimulus from the Biden government is expected to have massive spill-over effects for the rest of the world, especially China, the world’s largest exporter. Bloomberg Economics’ Chang Shu upgraded her growth forecast for China for this year to 9.3% compared to 8.2% earlier. The government the official target this year is a growth of more than 6%.

– Assisted by James Mayger, Lin Zhu, Lianting Tu, Livia Yap and Catherine Ngai

Updates with commentary from economist and market response.

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