China: Economic Growth Accelerated under the Leadership of High-tech Industries
2024-04-19
■ China's economic growth from January to March was a remarkable achievement, surpassing the government's target of around 5%.
■ However, the economic activity in March showed varying strengths and weaknesses, continuing to indicate the problem of oversupply.
China's actual GDP growth rate from January to March announced on the 16th (5.3% year-on-year and 1.6% month-on-month), exceeded the government's target of around 5%, and the economy is showing a good trend. The manufacturing industry (with a year-on-year growth of 6.7%) has become the main driving force for growth, and even in the context of restricted procurement of advanced products due to strengthened regulation in the United States, the growth rate of the high-tech manufacturing industry (with a year-on-year growth of 7.5%) has accelerated. In the service industry (with a year-on-year growth of 5.0%), although the real estate industry (with a year-on-year decrease of 5.4%) showed negative growth, information and communication, software, and information technology services (with a year-on-year growth of 13.7%) overgrew and reached the target level set by the government. In the high-tech field, fixed assets investment in manufacturing (aerospace, computer, etc.) and service (e-commerce services, information, communication technology services, etc.) also increased significantly, indicating that the Chinese government's structural reform and industrial cultivation policies are making progress.
The leading economic indicators for March released on the same day showed that the growth rate of fixed assets investment (excluding rural areas, 4.5% year-on-year growth since the beginning of the year) was strengthened, while the growth rate of industrial production (4.5% year-on-year growth), retail sales (3.1% year-on-year growth), and service industry production index (5.0% year-on-year growth) slowed down. Due to the rapid recovery of economic activities after lifting the "zero COVID-19" policy, many indicators deteriorated. Regarding monthly data, industrial production (down 0.08% month-on-month) fell for the first time in 11 months, and fixed assets investment (up 0.14% month-on-month) only increased slightly. Retail sales (up 0.26% month-on-month), sluggish since last autumn, recorded the highest growth rate in five months. Although production activities have maintained strong growth in the past, relatively speaking, household consumption growth has been weak, and economic activities have shown a trend of varying strengths and weaknesses. In addition, the deterioration of exports (a year-on-year decrease of 7.5%) and producer price index (a year-on-year decline of 2.8%) indicates a weak recovery in demand, and the economic supply and demand are still oversupplied.
In terms of real estate-related indicators, the decline in real estate development investment (a year-on-year decrease of 9.5% at the beginning of the year) and the decline in the price index of new residential buildings in major 70 cities (calculated by Reuters, a year-on-year decrease of 2.2%) have further expanded. Real estate sales (based on building area, a year-on-year reduction of 19.4% at the beginning of the year) continue to decline significantly. There are no signs of the real estate market adjustment being completed. Combined with sustained youth unemployment and overcapacity, domestic demand will be suppressed in the medium term. These are all side effects of the economic structural transformation promoted by the Chinese government, which poses future challenges and accumulations for financial stability.
■ However, the economic activity in March showed varying strengths and weaknesses, continuing to indicate the problem of oversupply.
China's actual GDP growth rate from January to March announced on the 16th (5.3% year-on-year and 1.6% month-on-month), exceeded the government's target of around 5%, and the economy is showing a good trend. The manufacturing industry (with a year-on-year growth of 6.7%) has become the main driving force for growth, and even in the context of restricted procurement of advanced products due to strengthened regulation in the United States, the growth rate of the high-tech manufacturing industry (with a year-on-year growth of 7.5%) has accelerated. In the service industry (with a year-on-year growth of 5.0%), although the real estate industry (with a year-on-year decrease of 5.4%) showed negative growth, information and communication, software, and information technology services (with a year-on-year growth of 13.7%) overgrew and reached the target level set by the government. In the high-tech field, fixed assets investment in manufacturing (aerospace, computer, etc.) and service (e-commerce services, information, communication technology services, etc.) also increased significantly, indicating that the Chinese government's structural reform and industrial cultivation policies are making progress.
The leading economic indicators for March released on the same day showed that the growth rate of fixed assets investment (excluding rural areas, 4.5% year-on-year growth since the beginning of the year) was strengthened, while the growth rate of industrial production (4.5% year-on-year growth), retail sales (3.1% year-on-year growth), and service industry production index (5.0% year-on-year growth) slowed down. Due to the rapid recovery of economic activities after lifting the "zero COVID-19" policy, many indicators deteriorated. Regarding monthly data, industrial production (down 0.08% month-on-month) fell for the first time in 11 months, and fixed assets investment (up 0.14% month-on-month) only increased slightly. Retail sales (up 0.26% month-on-month), sluggish since last autumn, recorded the highest growth rate in five months. Although production activities have maintained strong growth in the past, relatively speaking, household consumption growth has been weak, and economic activities have shown a trend of varying strengths and weaknesses. In addition, the deterioration of exports (a year-on-year decrease of 7.5%) and producer price index (a year-on-year decline of 2.8%) indicates a weak recovery in demand, and the economic supply and demand are still oversupplied.
In terms of real estate-related indicators, the decline in real estate development investment (a year-on-year decrease of 9.5% at the beginning of the year) and the decline in the price index of new residential buildings in major 70 cities (calculated by Reuters, a year-on-year decrease of 2.2%) have further expanded. Real estate sales (based on building area, a year-on-year reduction of 19.4% at the beginning of the year) continue to decline significantly. There are no signs of the real estate market adjustment being completed. Combined with sustained youth unemployment and overcapacity, domestic demand will be suppressed in the medium term. These are all side effects of the economic structural transformation promoted by the Chinese government, which poses future challenges and accumulations for financial stability.