China’s economy soars a year after the fall of the pandemic

Photographer: Qilai Shen / Bloomberg

China’s economy soared during the first quarter as consumer spending strengthened, joining production and investment to recover from the fall of Covid a year ago.

Gross domestic product rose to a record 18.3% in the first quarter from the previous year, largely in line with the 18.5% forecast in a survey of Bloomberg economists. The figures are skewed by comparisons from a year ago, when the economy was closed. A better reading of the economy’s momentum comes from quarter-on-quarter growth, which slowed to 0.6% from 2.6% in the previous three months.

The Chinese economy steadily picked up pace after a historic contraction in the first quarter of last year, regaining all lost ground in late September. The rise has been led by strong industrial production and robust exports, as the pandemic fueled demand for Chinese-made medical and electronic products.

“We are witnessing a slightly more balanced recovery of the Chinese economy,” said Wang Tao, chief economist of China UBS AG, he said in an interview with Bloomberg TV. As policy begins to normalize, investment in property and infrastructure will decline in the coming quarters, he said. “Thus, early harvesting in the construction industry will give way to increased domestic consumption,” he said.

China’s CSI 300 benchmark erased a previous loss of 0.6%. China’s 10-year government bond futures also reversed previous losses to 0.1%, while the 10-year benchmark sovereign debt yield fell one basis point to 3.165%. The land yuan lost 0.17%, the first drop this week, to 6.5329 per dollar.

Strong GDP growth, rising inflation and high debt levels have alerted policymakers. Beijing has said it wants to cut fiscal and monetary stimulus now that the recovery is picking up pace and is tightening regulatory oversight in areas such as lending and real estate. The central bank has called on banks to reduce lending growth in the coming months, although officials have stressed a gradual reduction in policy.

Globally, vaccine deployment helps strengthen the global economy and support China’s growth. In addition, the massive fiscal stimulus from the Biden administration is expected to have huge repercussions for the rest of the world, especially in China, the world’s largest exporter. Bloomberg Economics’ Chang Shu improved it growth forecast for China for this year at 9.3%, from the previous 8.2%. The government the official target is growth of more than 6% this year.

– With the assistance of James Mayger, Lin Zhu, Lianting Tu, Livia Yap and Catherine Ngai

(Updates with comments from the economist and market reaction.)