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A traffic police officer prepares to check a truck at a service station near Shanghai, which has ordered stricter restrictions on travel in and out of the city as China battles the most severe spread of Covid since the early days of the epidemic in 2020.
Yin Liqin | China News Service via Getty Images
BEIJING – China’s first-quarter GDP grew faster than expected despite the impact of Covid lockdowns in parts of the country in March, according to data released by the National Bureau of Statistics on Monday.
First-quarter gross domestic product rose 4.8%, beating expectations for a 4.4% increase from a year ago.
Fixed-asset investment for the first quarter rose 9.3% from a year ago, beating expectations for an 8.5% growth. Manufacturing investment rose 15.6% in the first quarter of last year, and infrastructure saw an 8.5% increase over the same period.
Industrial production in March rose 5%, topping forecasts for 4.5% growth.
However, retail sales in March fell 3.5% more than expected from a year earlier. Analysts polled by Reuters had expected a decline of 1.6%.
Starting in March, the country struggled to contain the worst outbreak of Covid since the initial phase of the pandemic in 2020. At that time, lockdowns in more than half of the country had resulted in 6.8% contraction in first-quarter growth from the previous year.
“We must realize that with the increasing complexity and uncertainty of the domestic and international environment, economic development is facing great difficulties and challenges,” the office said in a statement.
High unemployment rates
The unemployment rate in 31 major Chinese cities rose from 5.4% in February to 6% in March – the highest rate ever, according to official data going back to 2018.
“This indicates that the unemployment problem in large cities is becoming more acute than it was when the Covid pandemic began in 2020,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
“The Covid outbreak only forced Shanghai and some other cities to go into lockdowns in late March and early April. So it is possible that the economic slowdown has worsened in April,” he said.
As Covid enters its third year, China is once again facing the challenge of ensuring a record number of graduates get jobs. This year, the number of higher education graduates is expected to increase by 1.67 million from 2021 to 10.76 million.
In March, the unemployment rate for 16-24 year olds remained much higher at 16% – the highest rate since August 2020.
Overall, the national unemployment rate in cities rose in March to 5.8%, up from 5.5% in February.
The rise “reflects greater difficulties for enterprises’ production and operations, and greater pressure on employment,” said Fu Lingwei, a spokesman for the National Bureau of Statistics, at a press conference on Monday in Chinese.
He noted that since March, some people have had difficulty finding jobs due to the impact of Covid locally. This contrasts with the historical seasonal trend in which the unemployment rate tends to fall in March, after rising in January and February as workers change jobs around the Spring Festival, Fu said.
The role of the real estate
“To achieve the 5.5% economic growth target for this year, consumption must not decline due to the epidemic, real estate investment must stop declining and stabilize as soon as possible, fiscal spending must be strong enough and imports and exports cannot contribute negatively.” , said Bruce He Pang, head of macro and strategic research at China Renaissance, in Chinese, translated by CNBC.
He said that since retail and commercial sales have limited ability to contribute to growth, the market has greater expectations for real estate to play a role.
although [the] The Chinese economy will be under pressure in the near term due to the epidemic controls, and we remain confident in the resilience and vitality of the Chinese economy in the long term.
Monica Lee
Equity Manager, Fidelity International
Real estate, which has struggled since Beijing’s crackdown on developers’ use of debt, saw investment increase 0.7% in the first quarter of last year. This is despite a twofold decrease in floor area and total sales of commercial buildings sold.
Although the economic numbers released for January and February beat expectations, the numbers for March are beginning to reflect the impact of stay-at-home orders and travel restrictions around economic centers such as The coastal city of Shanghai.
Exports, the main driver of Chinese growth, rose more than expected 14.7% in March, but imports fell unexpectedly, down 0.1% from a year ago, according to data released last week.
“We must coordinate efforts to prevent and control Covid-19, economic and social development, make economic stability our top priority and strive for progress while ensuring stability, and place the task of ensuring stable growth in a more prominent position,” the office said. She said.
Retail sales grew 3.3% in the first quarter of last year, but the apparel, auto and furniture subcategories still posted a decline in the period.
Within retail sales, jewelry fell the most and was down 17.9% in March from a year ago. The data showed that it was followed by a decrease of 16.4% in catering services and 12.7% in clothes and shoes.
“although [the] The Chinese economy will come under pressure in the near term due to epidemic controls, and we remain confident in the resilience and long-term vitality of the Chinese economy,” said Monica Lee, equities director at Fidelity International.
Among the signs of support for long-term growth, Li noted that “the strong issuance of special local government bonds since the second half of last year has paved the way for accelerating infrastructure investment in the future.”
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