China’s economy exhibited robust growth in the first quarter of the year, outpacing expectations and demonstrating resilience amid ongoing challenges, particularly in the property market and consumer spending. According to the National Bureau of Statistics (NBS), China’s gross domestic product (GDP) expanded by 5.3 percent year-on-year in the first quarter, surpassing economists’ estimates of 4.6 percent growth. This acceleration from the previous quarter’s 5.2 percent growth was largely driven by robust growth in high-tech manufacturing.
Industrial production
Industrial production saw a notable 6.1 percent year-on-year increase in the first quarter of 2024. The strong performance in high-tech manufacturing sectors such as 3D printing equipment, electric vehicle charging stations, and electronic components propelled China’s economy. Moreover, overseas demand picked up with an expansion in the country’s manufacturing purchasing managers’ index (PMI) for the first time in 6 months.
China has set an ambitious annual growth target of around 5 percent for 2024. However, concerns persist regarding weak consumer and business confidence, as well as the prolonged downturn in the real estate sector.
Property market challenges
The property market remains a major drag on China’s economy. Hence, property investment and new property sales experienced significant declines in the first quarter. Property investment saw a 9.5 percent decline in the first quarter while new property sales dipped 27.6 percent. Moreover, weakness in the property market is affecting consumer spending, as 70 percent of household wealth in China directly relates to real estate.
Consumer spending has also declined due to weak job prospects, economic uncertainty and low household confidence. Moreover, retail sales growth slowed to 3.1 percent in March, reflecting subdued consumer demand.
Read: Inflation in France slows to lowest point since 2021, records 3.2 percent in March
Foreign investor confidence
Confidence among foreign investors in China’s economy remains weak, with foreign direct investment declining in recent months. However, the growth during the first quarter of 2024 mainly came from state-owned enterprises which spent 7.8 percent more compared to last year. Meanwhile, investment by the private sector increased slightly by 0.5 percent.
To boost economic growth and attract foreign investment, China has implemented measures such as interest rate cuts and increased infrastructure spending. Additionally, China has made efforts to strengthen trade and cooperation with foreign partners in recent meetings with leaders from Germany and the United States.
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