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China’s economy surpassed expectations by growing 5.3% in the first quarter.

by FX BrokerNews

HONG KONG — China’s economy outpaced expectations in the first three months of the year, propelled by policies aimed at bolstering growth and increased demand, the government announced on Tuesday.

Official data revealed that the world’s second-largest economy expanded by a 5.3% annual rate in January-March, surpassing analysts’ projections of approximately 4.8%. Compared to the previous quarter, the economy grew by 1.6%.

Despite grappling with challenges stemming from the COVID-19 pandemic and a property crisis, China has struggled to regain momentum.

The positive data on Tuesday followed reports of a 7.5% decline in exports in March compared to the previous year, alongside weakening imports. Additionally, inflation eased, reflecting deflationary pressures linked to subdued demand amid the property sector turmoil.

Industrial output for the first quarter rose by 6.1% year-on-year, while retail sales increased by 4.7%. Fixed investment in factories and equipment also grew by 4.5% compared to the same period last year.

The robust growth in January-March was supported by strong manufacturing performance, increased household spending during the Lunar New Year holidays, and policies aimed at stimulating investments, according to China economist Louise Loo of Oxford Economics.

However, Loo cautioned that indicators for March suggest a slowdown following the Lunar New Year festivities, while external demand conditions remain uncertain, as evidenced by March’s sharp decline in exports.

Looking ahead, factors such as inventory adjustments, normalization of household spending post-holidays, and a cautious approach to government spending and stimulus measures will influence growth in the current quarter.

As Beijing endeavors to bolster the economy, policymakers have introduced a series of fiscal and monetary measures. China has set an ambitious gross domestic product (GDP) growth target of approximately 5% for 2024.

Although stronger growth in China typically boosts share prices across the region, Asian shares experienced a sharp decline on Tuesday following a retreat on Wall Street.

The Shanghai Composite index dropped by 1.4%, while the Hang Seng in Hong Kong fell by 1.9%. The benchmark for the smaller Shenzhen market in southern China recorded a decline of 2.8%.

While stronger growth in China is typically viewed as beneficial for neighboring economies reliant on Chinese demand, robust growth figures also signal a potential reduction in government stimulus measures.

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