China’s GDP grows more than expected after Covid-19 restrictions end | Economy

China’s economic recovery accelerated in the first quarter as the end of severe Covid-19 restrictions lifted the world’s second-largest economy out of a suffocating epidemic crisis, although some headwinds persisted.

Gross domestic product (GDP) grew by 4.5% in an annual comparison, in the first three months of the year, according to data from the National Statistics Service this Tuesday (17).

The growth is higher than 2.9% in the previous quarter and beat analysts’ expectations for an expansion of 4.0%.

China’s recovery has so far been uneven, with spending increasing on consumption, services and infrastructure, while prices slowing and bank savings rising, raising questions about demand.

In the quarterly comparison, GDP grew 2.2% from January to March, in line with analysts’ expectations and above the revised 0.6% increase in the previous quarter.

Beijing has vowed to ramp up its support for the economy as it emerged from one of its worst performances in nearly half a century last year due to pandemic restrictions.

China’s central bank said last week that it would maintain ample liquidity, stabilize growth and jobs and focus on expanding demand.

On Monday, the central bank provided liquidity support to banks through its medium-term credit facilities, but kept the price of these loans unchanged, indicating that the authorities are not too concerned about immediate growth prospects.

Analysts polled by Reuters expect China’s growth in 2023 to accelerate to 5.4% from 3.0% last year.

The government has set a modest economic growth target of around 5% for this year, after missing the 2022 target.

The central bank cut lenders’ reserve requirements for the first time this year in March and the government introduced more fiscal stimulus.

Separate data on March activity, also released on Tuesday, showed that retail sales growth accelerated to 10.6%, beating expectations to reach the highest level in nearly two years, while growth in industrial production also accelerated, but came in just below expectations.

“The current market concerns about deflation largely reflect concerns about the strength and sustainability of the economic recovery,” Wen Bin, chief economist at China Minsheng Bank, said in a note.

“After the epidemic prevention and control has been improved, the production side has basically returned to the pre-epidemic level, but the momentum on the demand side is still weak.”