2024-04-18 04:56:34
Investment encouragement policy effect exceeds expectations
Leading growth in manufacturing and energy sectors
Retail sales only increased by 3.1% in March
46% of middle class “preserve assets rather than invest”
In China, where there are great concerns about deflation (economic recession amid falling prices) due to a weak real estate market and sluggish consumption, the gross domestic product (GDP) growth rate in the first quarter of this year (January to March) recorded 5.3%. It showed a ‘surprising performance’ that exceeded both market expectations and the growth rate of the fourth quarter (October to December) of last year. The authorities appear pleased, saying that if the current trend continues, this year’s growth target (5.0%) will be easily achieved.
However, contrary to the strong performance of the manufacturing and export sectors, the growth rate of retail sales in March fell short of expectations, and new home prices also remained negative for nine consecutive months. Accordingly, the debate over whether the ‘economic recovery momentum’ will continue is intensifying. This means that the economy can be seen as truly booming only when real estate and domestic demand recover.
● Growth led by manufacturing-export boom
China’s National Bureau of Statistics announced on the 16th that GDP in the first quarter of this year was 29.6299 trillion yuan (about 5,685.7 trillion won), up 5.3% from the first quarter of last year. It surpassed both the Reuters forecast (4.6%) and the Chinese economic media Caixin forecast (4.9%).
Strong industrial production boosted the growth rate in the first quarter. Manufacturing in the first quarter increased by 6.7% compared to the same period last year. The energy industry (6.9%) and high-tech industry (7.5%) also showed good performance.
Fixed asset investment also increased by 4.5%. In particular, investment in high-tech manufacturing and high-tech services increased by 10.8 and 12.7%, respectively. This is analyzed to be the influence of the authorities encouraging large-scale facility investment across industries and implementing the ‘replace new’ policy (support subsidies when changing home appliances). The National Bureau of Statistics commented, “Production demand has steadily increased and policy effects are showing.”
Exports in the first quarter amounted to 5.7378 trillion yuan (approximately 1,099.2 trillion won) in yuan, an increase of 4.9% compared to the previous year. However, unlike the rapid growth of 7.1% in total exports in January and February, it decreased by 3.8% in March due to the decline in the value of the yuan against the US dollar.
Western financial companies have also recently been raising China’s growth targets for this year one after another. Recently, Goldman Sachs increased the rate from 4.8% to 5.0%, and Morgan Stanley increased it from 4.2% to 4.8%.
● Concerns remain about the consumption-real estate slump
Although the Chinese government appears encouraged, there are also concerns from outside. This is because economic indicators that showed improvement at the beginning of the year showed sluggishness in March. March retail sales, announced on the same day, only increased by 3.1% compared to the same period last year. It fell far short of the February growth rate (5.5%) as well as the market forecast (5.1%).
This is because the consumer sentiment of approximately 400 million middle-class people, who are considered the ‘growth engine of the economy’, has frozen. According to the ‘New Middle Class White Paper’ published annually by local media Wu Xiaobo, last year, 43% of China’s middle class (city residents earning approximately 38 million won per year) responded that “their wealth has decreased.” Compared to a year ago, it increased by 12% points. Additionally, 60% of respondents said, “I have no plans to purchase real estate.” Additionally, 46.1% said, “Asset preservation is a priority over investment.”
Concerns about a real estate recession are also high. New home prices in China fell 2.2% in March compared to a year ago. Reuters reported that the decline on a monthly basis was the highest in about nine years since August 2015. Sales prices for new buildings in the four major cities of Beijing, Shanghai, Guangzhou, and Shenzhen in March also fell 1.5% compared to the same month last year. During the same period, the sale price of existing buildings fell 7.3%.
Accordingly, ‘economic powerhouse’ Deputy Prime Minister Heifeng (何立峰) is taking the lead in reviving real estate. On the 14th, Deputy Prime Minister Heo instructed the financial sector to “give as much credit as possible to projects on the whitelist (high-quality real estate selected by the authorities).” However, it is unclear when the real estate market will recover. Goldman Sachs predicted that at least 15 trillion yuan (about 2,876.25 trillion won) would be needed to recover real estate.
Reporter Kim Cheol-joong [email protected]
-
- great
- 0dog
-
- I’m so sad
- 0dog
-
- I’m angry
- 0dog
-
- I recommend it
- dog
Hot news now
2024-04-18 04:56:34