China’s economy reaches new highs after zero-Covid restrictions

Official data released today revealed that China’s economy grew by 4.5% year-on-year in the first quarter, recovering after the conclusion of zero-Covid restrictions in late 2021.

This is the first indication since 2019 of the world’s second-largest economy making progress without the strict health measures that effectively controlled the coronavirus but heavily impacted businesses and supply chains.

Retail figures, which serve as the primary indicator of household spending, increased by 10.6% year-on-year last month, marking the most significant jump since June 2021.

The National Bureau of Statistics (NBS) published data showing industrial production rose by 3.9% year-on-year in March, reported Bangkok Post.

The NBS report released today stated that in the first three months of the year, China encountered a “grave and complex international environment, as well as arduous tasks to advance reform, development and ensure stability at home.”

Before the sudden abandonment of Beijing’s virus containment strategy in December, the uncompromising regime of strict quarantines, widespread testing, and travel restrictions had significantly limited normal economic activity.

In addition to the crises afflicting China’s economy, such as a debt-ridden property sector, declining consumer confidence, global inflation, potential recession in other countries, and geopolitical tensions with the United States, China’s prospects for growth are precarious.

The official growth figure for January-to-March was notably higher than the 3.8% anticipated by analysts in an AFP poll.

China’s economy expanded by just 3% in 2021, marking one of its poorest showings in decades.

The first quarter of 2022 saw 4.8% growth, which slowed to a mere 2.9% in the final three months of the year.

The government has established a relatively moderate growth target of about 5% for this year, and Premier Li Qiang has cautioned that achieving this goal may prove difficult.

An AFP survey of analysts suggested that China’s economy would experience an average growth rate of 5.3% this year, closely aligning with the International Monetary Fund’s prediction of 5.2%.

Nevertheless, experts have warned that broader global trends could hamper China’s recovery.

Teeuwe Mevissen, an analyst at RaboBank, said…

“Consumption experienced a recovery during the first quarter, partly due to pent-up demand, but has not yet returned to pre-pandemic levels.”

Teeuwe added that factors such as the loss of household wealth due to the real estate crisis and lost household income during the pandemic may be reasons for consumers not spending more.