China’s economy grew 18.3% in Q1 2021, but its COVID-19 rebound appears to be leveling off
China’s economy has rebounded from last year’s deep coronavirus crisis, propelled by stronger demand at home and abroad and the government’s continued support for small businesses.
- Analysts say China’s growth will return to modest levels for the rest of the year
- Manufacturing and consumer activity returned to pre-coronavirus levels
- Exports have driven the country’s economic recovery
But the rapid expansion, heavily skewed by the drop in activity a year earlier, is expected to moderate later this year as the government focuses on containing financial risks in overheated sectors of the economy.
Gross domestic product (GDP) jumped 18.3% in the first quarter of 2021 compared to the previous year, official data showed on Friday.
This was the fastest growth since quarterly surveys began in 1992 and was up from 6.5% in the fourth quarter of last year.
“The result is that with the economy already above its pre-virus trend and the withdrawal of political support, China’s post-COVID rebound is stabilizing,” said Julian Evans-Pritchard, Chinese economist. senior at Capital Economics.
“We expect quarter-over-quarter growth to remain modest for the remainder of the year as the recent construction and export boom unfolds, pushing activity back on trend.”
Aided by strict virus containment measures and emergency relief for businesses, the economy recovered from a sharp 6.8% drop in the first three months of 2020, when an outbreak of COVID-19 in the central city of Wuhan quickly became a crippling pandemic that has killed an estimated 3 million people around the world.
China’s rebound has been led by exports as factories rush to fill overseas orders and, more recently, a steady recovery in consumption as shoppers return to restaurants, malls and car dealerships.
Retail sales rose 34.2% year-on-year in March, beating a 28% gain expected by analysts and stronger than the 33.8% jump seen in the first two months of the year.
Other data, however, showed a moderation in the expansion, with quarter-over-quarter growth slowing to 0.6% in January-March from a 3.2% revision in the previous quarter, missing out on expectations of a 1.5% increase.
Growth in the second quarter is expected to drop
National Bureau of Statistics spokeswoman Liu Aihua said that while the economy starts the year 2021 on a solid footing, the service sector and small businesses still face challenges, while inflation continues to face challenges. consumption would probably remain moderate.
Data from last week showed consumer prices were rising only at a modest pace in March, even as factory exit inflation hit an almost three-year high.
Li Wei, an economist at Standard Chartered in Shanghai, expects second-quarter growth to slow to 7%.
The world’s second-largest economy is expected to grow 8.6% in 2021, according to a Reuters poll, which would easily exceed the government’s annual growth target for 2021 by more than 6%.
China’s GDP grew only 2.3 percent last year.
It was its smallest expansion in 44 years, but still made it the only major economy to avoid the contraction as other industrial powers battled the pandemic.
With the economy back on a more solid footing, China’s central bank is focusing on slowing credit growth to help contain financial risks.
However, he is moving cautiously to avoid derailing the recovery, with policymakers pledging not to make sudden policy changes.
The authorities are particularly concerned about the financial risks associated with the country’s overheated real estate market and have asked banks to reduce their loan portfolios this year to guard against asset bubbles.
Separate data released on Friday showed new home prices in China rising at the fastest rate in seven months in March, with gains spreading to more cities as searing demand defied government efforts to cool the market. .
ABC / Reuters