Chinese consumers are wary of big purchases like cars and apartments, but they are starting to spend again. Many factories are still undercapacity, but exports are stepping up. Investment in infrastructure and manufacturing remains strong despite a slowdown in new housing construction.
China’s economic growth rebounded faster than expected in the first three months of the year after the government abruptly lifted stringent “no coronavirus” measures in early December.
China’s economy from January to March grew 4.5 percent compared to the same month last year, the country’s National Bureau of Statistics said Tuesday. Retail sales, a barometer of consumer willingness to spend, rose 10.6% year-on-year in March despite weak car sales.
The stakes in the rest of the world are high. China has been the single biggest engine of global growth for most of the last two decades. Despite heightened tensions with the United States and growing disagreements with Europe, China remains highly interdependent with both economies.The International Monetary Fund said last week that the world face an increased risk of painful deceleration This year, Western central banks have raised interest rates and banks have stumbled.
Tuesday’s Gross Domestic Product report shows that China, the world’s second largest economy, is coming back to life.
“Quarterly growth is starting to show the expected healthy recovery,” said Louise Lu, a China economist at Oxford Economics’ Singapore office. “In the early stages of reopening the economy, a very decent growth pace of 4.5% year-on-year provides room for authorities to provide support to weaker parts of the economy if needed,” she said.
China is taking steps to stimulate growth. Governments spend money on high-speed rail, highways, bridges and other infrastructure to boost jobs and consumers. The central bank, the People’s Bank of China, told commercial banks last month that it could slightly reduce the reserves it holds against potential losses and make more loans.
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This year’s stock and bond market declines have been painful and future developments remain difficult to predict.
Growth in the first few months of the year 2.9 percent The fourth quarter of last year is at the pace when a wave of illness swept across the country in December after the pandemic was lifted from control.
So far, this year’s spending has been most on services such as travel and dining. Lines are forming for breakfast tables at large hotels in Beijing and Shanghai, where elevators were shut down last year and he was often alone in 200-seat restaurants. Most of its activity is driven by Chinese consumers, such as flights to China. slow to reopen.
In contrast, the slow-motion housing crash remains a major drag on the economy. Construction of new homes, offices and shops fell by 5.8% in the first quarter compared with the same period last year.
A city on the Yangtze River near Shanghai, Suzhou’s regional economy shows many national trends. Consumers and businesses are spending again. However, there are considerable variations by region and even by company.
Consumer spending picks up, but unevenly.
At a street market in Suzhou, a butcher named Zhang Yongmin stood behind a table covered in slabs of raw pork and complained about the lingering frugality of his neighbors. A meat buyer, he said, asks him to cut a large fillet into two or he three pieces and then he buys only one.
Liu Zhongyou, a catfish and clam vendor at a Suzhou street market, had a very different experience. He lost all his sales for a month last year when pandemic restrictions closed nearby restaurants, but now the same eatery is reopening for bulk orders.
“We were losing money because of the epidemic. We didn’t have any customers,” Liu said. “Enough.”
The different experiences of two SMEs in the same market point to China’s recovery.
China’s retail sales increased by only 3.5% in January and February compared to the same months last year. His double-digit increase in March therefore represents the first sign of a strong recovery. However, it is a significant increase compared to the actual decline in March 2022, when Covid cases increased and Shanghai’s two-month lockdown began.
And some sectors have not recovered from the pandemic at all. Cinema has been hit particularly hard, with a third of them going bankrupt. According to Maoyan Entertainment, a Beijing-based online ticketing company that tracks the broader industry, box office receipts fell 55% last month compared to the same month four years ago.
The incomes of millions of Chinese have been severely depressed during the pandemic and remain weak. The unemployment rate for her 24-year-old from 16 actually increased from 18.1% in February to 19.6% in March. This is because many college graduates have trouble finding white-collar jobs and are wary of working in factories. Many households are holding back on spending until their savings recover.
Factories keep up with orders.
A tabletop electric motor repair shop sits next to Suzhou’s iconic canal, lined with weeping willows. The shop has long supplied many small nearby workshops that produce nails and screws for the city’s huge industrial sector.
Guo, the shopkeeper who gave his surname, said some workshops failed during the pandemic, but survivors have resumed business. “Basically, things are much better than before, and those that weren’t closed have basically recovered,” Guo said.
Industrial production, the output of factories, mines and power plants, increased 3.9% from last year in March, improving from 2.4% in January and February. However, industry growth remained poor by Chinese standards in March. A sharp slowdown in the automotive industry was one of the main culprits.
First quarter car sales fell 13.4%. At the end of December, China revoked state subsidies for electric vehicles and reinstated consumption tax on gasoline vehicles, which had been suspended due to the country’s “no new coronavirus” measures.
Overall, exports are recovering, rising 14.8% year-on-year in March. Factories are catching up on the backlog of orders that has built up during the ‘coronavirus zero’ lockdown.
China is building railroads, not apartments.
Investment in new apartments, roads, factories and other so-called fixed assets has long been a mainstay of the Chinese economy. Overall fixed asset investment has increased, he increased by 5.1% in the first quarter compared with the same period last year. But investments have not followed a pattern welcomed by Beijing.
Government spending on new railroads, roads and other infrastructure increased 8.8% in the first quarter compared to the same month last year, according to the National Bureau of Statistics. Investment in manufacturing he increased by 7%.
But after cash shortages and the defaulting of dozens of foreign bonds over the past two years, residential property developers have mostly started new housing projects, even as home prices have started to stabilize. Is not …
They’re focused on completing the apartments they’ve already started, but many of them are behind schedule. Stock market investors remain wary of the sector as shares of one major developer, Sunac China Holdings, fell 59% last week when it resumed trading after a year-long trading hiatus. .
Even those who hand over new apartments from developers are often reluctant to spend money on painting and furniture. At the paint shop down the street from Mr. Guo’s electrical repair shop, a customer disappeared.
“We are not in business now,” said the shopkeeper. “No one is coming”
Re-U Contributed to research.
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