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China posted record year-over-year growth in Q1 but the recovery is seen to be slowing


China’s economy grows by record 18.3% in the first quarter of the year compared to the same period in 2020, when it shrank for the first time after decades due to the COVID-19 pandemic. This is slightly lower than analysts’ expectation of a 19% surplus recovery.

  • Economy recovers on power of industrial production (+ 24.5%) as well as retail sales (+ 34.5%) and general household consumption, with services lagging. According to the country’s National Bureau of Statistics, production is still 10.3% higher than it was in the first three months of 2019.

  • Economy extend increase by 0.6% in the period compared to the previous quarter ending in December 2020, a significant decrease compared with the growth rate of the previous quarter of 3.2%.

  • The Chinese government has set an official growth target of 6% for 2021, but most analysts so far see the economy expanding by more than 8%.

  • The NBS showed the numbers “continuing a steady recovery”, but warned that the pandemic “is still spreading globally and a complicated international scene with high volatility and uncertainty.”

Prospects: The slowdown could be welcomed by the government, who won’t have to worry too much about the possibility of high inflation in the coming months. In that case, it could retreat to a neutral number of both fiscal and monetary policy right now.

But if new pandemic waves strike in China or the rest of the world, and threaten growth, the government may prefer to continue fiscal stimulus rather than lowering interest rates – it would be in reverse. back to their stated policy of helping the economy to reduce the rate.

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