China’s economy logged a moderate growth in the first quarter amid the COVID-19 pandemic restrictions hitting consumption and heightened geopolitical risks, data from the National Bureau of Statistics revealed on Monday.
Gross domestic product grew at a pace of 4.8 percent on a yearly basis in the first quarter, faster than the 4.4 percent growth expected by economists and the 4.0 percent expansion registered in the previous quarter.
For the whole year of 2022, the government targets around 5.5 percent growth.
The official GDP figures understated the extent of the economic downturn, said Julian Evans-Pritchard and Sheana Yue, economists at Capital Economics. GDP growth looks set to be even weaker in the second quarter given the mounting disruption from the recent COVID-19 outbreak.
In March, industrial production advanced 5.0 percent, which was faster than the economists’ forecast of 4.5 percent. Nonetheless, the annual growth was weaker than the 7.5 percent increase in January to February period.
At the same time, retail sales were down 3.5 percent annually due to the travel restriction. Economists had forecast a moderate fall of 1.6 percent after logging the 6.7 percent rise in the January to February period.
In the first quarter, fixed asset investment grew 9.3 percent from the last year, again slower than the 12.2 percent rise posted in the first two months.
The surveyed unemployment rate rose to 5.8 percent in March from 5.5 percent in February.
Iris Pang, an ING economist said further impacts from lockdowns are imminent, not only because there has been a delay in the delivery of daily necessities, but also because they add uncertainty to services and factory operations that have already impacted the labor market.
With more cities going into lockdown and the PBoC being cautious with interest rate support, ING economist said the firm may further reduce GDP growth forecast from the current 4.6 percent.
Last week, the People’s Bank of China reduced the amount of cash that banks set aside as reserves to improve liquidity.
The central bank lowered the reserve requirement ratio by 0.25 percentage points on Friday. The reduction freed up CNY 530 billion in long-term liquidity. The weighted average RRR for Chinese financial institutions now stands at 8.1 percent.
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