China's economy showed a strong recovery in the first quarter of 2023 with GDP growth exceeding expectations, according to data released on Tuesday. The 4.5% year-on-year growth was higher than the expected 4% and last year's growth of 3%. This comes as China relaxed most of its anti-COVID restrictions at the beginning of the year, triggering a rebound in business activity and spending.
The government's stimulus measures have also played a vital role in the recovery, including softening its stance against internet giants and easing curbs on the country's property structure. The property sector, which accounts for a quarter of the Chinese economy, was grappling with strict rules on fundraising, leading to a prolonged cash crunch.
However, the recovery remains uneven as service sector demand and infrastructure spending have recovered from pandemic lows, but sluggish inflation and shrinking imports indicate that demand remains weak. The Chinese manufacturing industry, which is a bellwether for the Asian economy, is still struggling to recover from the COVID lull and sluggish overseas demand for Chinese goods.
Nonetheless, the retail sector performed well, with retail sales exceeding expectations, surging 10.6% in March against estimates for growth of 7.4%. This reading indicates that consumer spending is steadily picking up after three years of COVID disruptions. China's unemployment rate also fell more than expected to 5.3% in March.
The reading suggests that China's economic rebound is on track this year, although the government's 5% annual GDP target is seen as conservative. A Chinese recovery would be a positive development for broader Asian economies that rely on China as a trading destination, and the strong GDP reading has provided support for commodity markets.
