China: Despite soaring energy prices, China remains cautious about economic stimulus policies.

■ Growth accelerated in the first quarter, primarily driven by high-tech industries, but the pace of economic expansion slowed in March.  

■ Amidst concerns about the easing of supply chain disruptions and the US-China summit, measures to support the economy may be discussed. 
 
China released its main economic indicators for the first quarter (January-March) and March on the 17th, confirming the economic situation up to March. The real GDP growth rate for the first quarter (5.0% year-on-year, 1.3% quarter-on-quarter) shows an accelerated pace of growth, reaching the upper limit of the government's target for this year (4.5-5.0%), and the annualized quarter-on-quarter rate is slightly above 5.0%. Looking at the year-on-year industry breakdown, construction and real estate experienced negative growth, but the tertiary sector (5.2% year-on-year), driven by double-digit growth in information and communication, software and information technology (IT) services, and leasing and business services, contributed significantly to overall growth. The manufacturing and financial sectors also grew significantly faster than the overall level. The use of growth in high-tech and related industries to compensate for the adjustment in the real estate market reflects the progress of the Chinese government's economic structural reforms and "high-quality economic development." 

 
However, the pace of economic expansion slowed in March due to tensions in the Middle East and stagnant energy supplies. Key indicators showed a slowdown in growth or the rate of increase in industrial production (5.7% year-on-year), total retail sales of consumer goods (1.7% year-on-year), fixed asset investment (excluding rural areas, up 1.7% year-to-date), and the services production index (up 5.0% year-on-year). In trade statistics, imports, mainly copper ore and integrated circuits (ICs), increased significantly (27.8% year-on-year), while exports (2.5% year-on-year) saw a weakening. While industrial and services production, as supply-side items, maintained relatively high growth, retail sales and fixed asset investment, as demand-side items, grew at rates significantly below government targets. Furthermore, with weak domestic demand (consumption and investment), exports, as an external demand item, also lost momentum in March due to the stagnation of global supply chains, primarily for oil-related products. The producer price index (up 0.5% year-on-year) turned positive for the first time since 2022, indicating that deflationary pressures in the overall economy are easing, but the slow growth of aggregate demand relative to aggregate supply remains unchanged. Compared to developed countries, the price increases resulting from high energy prices are expected to remain moderate, except for related products. 

 
Against the backdrop of rising uncertainty in the Middle East and energy supply, and an anticipated slowdown in growth, the Chinese government has not introduced new economic stimulus policies beyond the consumption-boosting measures announced at the National People's Congress. Since the first quarter saw growth exceeding potential, the need for immediate countermeasures has not yet been reached. Therefore, it is expected that subsequent measures will be considered based on the easing of supply chain disruptions and the outcome of the US-China summit on May 14th and 15th.