China GDP: economy surged record 18.3 per cent in first quarter compared to a year earlier, but slowed versus fourth quarter

Andrew Mullen
·5-min read

China’s economy grew by 18.3 per cent in the first quarter of 2021 compared with a year earlier, the National Bureau of Statistics (NBS) announced on Friday.

This is the highest quarterly year-on-year growth rate since data first began being published in 1993.

This was just below expectations in the median survey of Bloomberg analysts, which had predicted 18.5 per cent growth between January and March.

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It marks a remarkable turnaround from the first quarter of 2020, when the economy suffered a dramatic collapse under pressure from the impact of the coronavirus, shrinking by 6.8 per cent in the first quarterly shrinkage since records began.

“The economic recovery in the first quarter of this year continued, and positive factors are accumulating. At the same time, we must also see that the Covid-19 epidemic is still spreading globally, the international landscape is complicated and severe, the foundation for domestic economic recovery is not yet solid, and some service industries and small and micro enterprises are still facing more difficulties in their production and operation,” said NBS spokeswoman Liu Aihua.

Last year’s figure, though, means the comparison at the start of 2021 is starting from a low base, like most of China’s economic data from the start of the coronavirus-hit 2020.

Given that the year-over-year figure is skewed upwards by the low comparison base, analysts focused on first quarter growth compared to the fourth quarter for a better view of the actual trend on the economy.

In inflation and seasonally-adjusted terms, China’s gross domestic product (GDP) grew by 0.6 per cent in the first quarter this year on a quarter-over-quarter basis, down from a revised 3.2 per cent growth in the fourth quarter, missing the 1.4 per cent rise expected by the median forecast of economists in the Bloomberg survey. The NBS revised the fourth quarter growth rate up from 2.6 per cent originally reported.

All told, momentum looks to have been broadly stable in March. But this was not enough to prevent a weaker quarter one following a slowdown around the turn of the year

Julian Evans-Pritchard

China has set an economic growth target of “above 6 per cent” for 2021 after it grew by 2.3 per cent last year overall. However, analysts expect growth to easily surpass that target, growing by more than 8 per cent this year.

“China’s GDP growth jumped to a record high in year-on-year terms last quarter. But this was entirely due to a weaker base for comparison from last year’s historic downturn. In quarter-on-quarter terms, growth dropped back sharply and, with the exception quarter one of last year, was slower than at any other time during the past decade,” said Julian Evans-Pritchard, senior China economist at Capital Economics.

“All told, momentum looks to have been broadly stable in March. But this was not enough to prevent a weaker quarter one following a slowdown around the turn of the year. The upshot is that with the economy already above its pre-virus trend and policy support being withdrawn, China’s post-Covid rebound is levelling off.

“We expect quarter-on-quarter growth to remain modest during the rest of this year as the recent boom in construction and exports unwinds, pulling activity back towards trend.”

In other figures released by the NBS on Friday, industrial production, a gauge of activity in the manufacturing, mining and utilities sectors, grew by 14.1 per cent in March from a year earlier after a 35.1 per cent rise in combined figures for January and February. This was below the median forecast of the Bloomberg survey for a rise of 18 per cent.

Retail sales, a key measurement of consumer spending in the world’s most populous nation, grew by 34.2 per cent, up slightly from the 33.8 per cent increase in January and February, and above the projection for a 28 per cent rise estimated in the Bloomberg survey.

Fixed asset investment – a gauge of expenditures on items including infrastructure, property, machinery and equipment – grew by 25.6 per cent in the January-March period compared to a year earlier compared to a gain of 35.0 per cent in the first two months of the year. This was below the median of the Bloomberg survey, which called for an increase of 26 per cent.

The surveyed jobless rate, an imperfect measurement of unemployment in China which does not include figures for the tens of millions of the nation’s migrant workers, stood 5.3 per cent in March from 5.5 per cent in February.

China has set a target of creating 11 million new urban jobs and a surveyed urban unemployment rate of 5.5 per cent for this year.

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