Economy
China’s Q1 GDP growth solid but March data shows demand still feeble
China’s economy grew faster-than-expected in the first quarter, data showed on Tuesday, offering some relief to officials as they try to shore up growth in the face of protracted weakness in the property sector and mounting local government debt.
However, a raft of March indicators released alongside the GDP data – including property investment, retail sales and industrial output – showed that demand at home remains frail and is retarding overall momentum.
The government has unveiled a raft of fiscal and monetary policy measures in a bid to achieve what analysts have described as an ambitious 2024 GDP growth target of around 5%, noting that last year’s growth rate of 5.2% was likely flattered by a rebound from a COVID-hit 2022.
Gross domestic product (GDP) grew 5.3% in January-March from the year earlier, data released by the National Bureau of Statistics showed, comfortably above analysts’ expectations in a Reuters poll for a 4.6% increase and slightly faster than the 5.2% expansion in the previous three months.
“The strong first-quarter growth figure goes a long way in achieving China’s ‘around 5%’ target for the year,” said Harry Murphy Cruise, economist at Moody’s Analytics.
“Industrial production also supported through the quarter, but weak March data is cause for some concern. Similarly concerning, China’s households continue to keep their wallets closed.”
On a quarter-by-quarter basis, GDP grew 1.6% in the first quarter, above the forecast for growth of 1.4%.
The world’s second-largest economy has struggled to mount a strong and sustainable post-COVID bounce, burdened by a protracted property downturn, mounting local government debts and weak private-sector spending.
Fitch cut its outlook on China’s sovereign credit rating to negative last week, citing risks to public finances as Beijing channels more spending towards infrastructure and high-tech manufacturing.
The government is drawing on infrastructure work – a well-used playbook- to help lift the economy as consumers are wary of spending and businesses lack confidence to expand.
WEAK MARCH DATA
The economy was off to a solid start this year, but March data on exports, consumer inflation, producer prices and bank lending showed that momentum could falter again and reinforced calls for more stimulus to shore up growth.
Indeed, separate data on factory output and retail sales, released alongside the GDP report, underlined the persistent weakness in domestic demand.
Industrial output in March grew 4.5% from a year earlier, compared with a forecast increase of 6.0% and a gain of 7.0% for the January-February period.
Growth of retail sales, a gauge of consumption, rose 3.1% year-on-year in March, against a forecast increase of 4.6% and slowing from a 5.5% gain in the January-February period.
Fixed asset investment grew an annual 4.5% over the first three months of 2024, versus expectations for a 4.1% rise. It expanded 4.2% in the January-February period.
“On the face of it, the headline number looks good… but I think the momentum is actually quite weak at the end,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets in Singapore.
Prior to the data release, analysts polled by Reuters expected China’s economy to grow 4.6% in 2024, below the official target.
Following the improved first-quarter GDP outcome, economists at ANZ raised their 2024 China growth forecast to 4.9% from 4.2% previously, while BBVA maintained their 4.8% growth projection.
Most investors appeared to take the headline GDP surprise with a pinch of salt given the weakness of the March data.
Traders said China’s state-owned banks were selling dollars to steady the yuan in the onshore market. China stocks .CSI300 were tracking broader markets lower as geopolitical tensions in the Middle East sapped risk sentiment.
CHALLENGES
The crisis in the property sector has been a major drag on China’s economy as it has rippled across business and consumer confidence, investment plans, hiring decisions and stock prices.
The March data highlighted the depth of the troubles in the sector, with investor confidence and demand still at a low ebb.
China’s new home prices fell at their fastest pace in more than eight years last month as debt troubles among property developers hurt demand.
Property investment slumped 16.8% year-on-year in March, worse than a 9.0% drop in January-February, while sales tumbled 23.7%, compared with a 20.5% fall in the first two months of the year.
With the Federal Reserve and other developed economies showing no urgency to start cutting interest rates, China may also face a longer period of subpar export growth in a further blow to policymakers’ hopes of engineering a strong economic recovery.
Adding to the challenge for China, authorities also have to contend with ongoing tensions with the United States over trade, technology and geopolitics.
Investors are looking to an expected Politburo meeting in April for clues on policy direction, though few analysts expect any major stimulus.
The People’s Bank of China (PBOC) has pledged to step up policy support for the economy this year, with markets betting on further cuts in banks’ reserve requirement ratio and interest rates.
Some analysts believe the central bank faces a challenge as more credit is flowing to production than into consumption, exposing structural flaws in the economy and reducing the effectiveness of its monetary policy tools.
Looking ahead, Jinyue Dong, senior economist at BBVA research, said he believes the “recovery has not got a solid foundation yet as the deep adjustment of real estate market and local government debt overhang still remain the main risks.”
“In addition, geopolitics risks mostly due to China-US confrontations before the US president elections will persist in the foreseeable future.”
Prime Minister Sheikh Hasina today (25 April) called for speaking out against all forms of aggression and atrocities, and say ‘no’ to wars.
“We must speak out against all forms of aggression and atrocities, and say ‘no’ to wars,” she said adding that Bangladesh supports the UN Secretary General’s ‘New Agenda for Peace.
The prime minister was addressing the 80th Session of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) held at the ESCAP Hall (2nd floor), United Nations Conference Center (UNCC) here.
She arrived in Bangkok on Wednesday on a six-day official visit to Thailand.
The PM said the pre-condition for sustainable development is lasting peace and security.
“We must settle regional disputes and tension through dialogue. Our mutual respect for national sovereignty and territorial integrity must remain paramount,” she said.
Hasina called upon the Asia-Pacific region, especially ASEAN, to redouble their efforts to end Rohingya crisis as all efforts at regional connectivity, integration, and prosperity will continue to be marked by a missing puzzle without it.
“The origin of their crisis has been in Myanmar, and its solution also lies in Myanmar,” she declared.
“As long as that solution remains out of reach, all our efforts at regional connectivity, integration, and prosperity will continue to be marked by a missing puzzle. Let us redouble our efforts to put that puzzle back in place,” she said.
She said that in August 2017, when thousands of Rohingya men, women, and children from Myanmar fled to Bangladesh, Bangladesh offered them temporary shelter.
“With an ever growing population, this has now become one of the largest humanitarian situations in the world,” she said.
Sheikh Hasina said that In the backdrop of ongoing armed conflicts in Myanmar, the Rohingya repatriation process is also getting delayed.
“This is creating serious security risks within and beyond our territories,” she said.
She called upon the Asia-Pacific region, especially ASEAN, to play a proactive role in resolving the volatile situation in Myanmar.
“We must ensure that the Rohingya can go back home in safety and dignity at the earliest possible,” she said.
The prime minister said that the Asia-Pacific region must stand united against its common enemies of poverty and hunger.
She said Bangladesh has reduced poverty from 41.51 percent to 18.7 percent between 2006 and 2022.
It also reduced extreme poverty from 25.1 to 5.6 percent during the same period.
“We remain confident about eradicating extreme poverty by 2030,” she said.
She mentioned that Bangladesh has made notable progress on food security, with focused interventions on maternal and child nutrition.
“Our current priority is to address inequalities through income distribution, asset ownership, and social protection,” she said.
The prime minister said that Asia-Pacific region must put up a united front in tackling the climate crisis, biodiversity loss, and transboundary pollution.
“We need to push for ambitious climate financing goals beyond 2025 at COP-29. We need to cooperate on cross-border water management and air quality improvement. We must all prepare for growing extreme weather events,” she said.
In this connection, she suggested looking into Bangladesh’s experience in disaster risk reduction.
“We appreciate UN-ESCAP’s support in improving our early warning capabilities,” she added.
Briefly describing various development programmes and achievements of her govebrment, the prime minister said that much of the development gains are affected by climate impacts.
“As a low-lying delta, Bangladesh has no option but to invest heavily in climate resilience,” she said.
She mentioned that Bangladesh is already recognised as a global leader in climate adaptation.
“We are happy to share our traditional and innovative solutions with other vulnerable countries,” she said.
She said that Bangladesh has urged developed and emerging economies in the region to raise their time-bound emission reduction targets.
“For economies in transition, it is important to have a just energy transition.”
In Bangladesh, she said, “we are working on long-term energy security with a sound mix of clean and renewable energy.”
“We shall continue to do our part in pursuing a circular and low-carbon economic growth pathway.”
She underscored the need for increased and easy access to financing and technology from both the public and private sectors.
“I invite UN-ESCAP to help build the capacity of climate-vulnerable countries to mobilise adequate international climate financing.”
PM Hasina said that Bangladesh now provides critical links to the Trans-Asian Highway and Railway networks.
“Our physical and digital infrastructures are being developed to foster regional trade and connectivity.”
She said Bangladesh offers access to the Bay of Bengal for land-locked territories in its neighbourhood.
“We stand ready to work together with all regional partners through mutual understanding and cooperation,” said the prime minister.
Bangladesh and Qatar signed 10 cooperation documents on Tuesday, including five agreements and five MoUs, aimed at strengthening ties and elevating relations to new heights.
Prime Minister Sheikh Hasina and Qatar’s Emir Sheikh Tamim bin Hamad Al Thani witnessed the signing of the documents.
The five agreements cover cooperation in the legal field, promotion and protection of mutual investments, avoidance of double taxation, maritime transport, and the establishment of a Joint Business Council (JBC) between FBCCI & QCCI.
The five MoUs include cooperation in sports and youth, manpower employment (Labour), diplomatic training, education, higher education, scientific research, and between Qatar Ports management Company “MAWANI QATAR” and Chittagong Ports Authority.
Earlier in the morning, PM Hasina warmly welcomed and received Emir Sheikh Tamim at her office.
They had a tête-à-tête meeting at the Prime Minister’s Office, followed by a bilateral meeting.
After signing the visitors’ book, the emir headed for Bangabhaban where the president received him.
A high-level Qatari delegation led by Qatar’s emir is on a state visit to Bangladesh at the invitation of the president and the prime minister.
During the ceremony, a road and a park in Dhaka were named after Emir of Qatar Sheikh Tamim Bin Hamad Al Thani.
The park, constructed in Kalshi area of Mirpur under Dhaka North City Corporation, and the road from Mirpur ECB point to Kalsi Fly Over were named after Emir of Qatar.
Now, the road and park are known as Sheikh Tamim Bin Hamad Al Thani Avenue and Sheikh Tamim Bin Hamad Al Thani Park.
The Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) is urging for greater involvement of marginal, small, and medium enterprises in international trade fairs. This initiative aims to spotlight Bangladesh’s promising products on the global market.
FBCCI President Mahbubul Alam made the call during the first meeting of the organisation’s Standing Committee on National and International Trade Fairs and Foreign Delegations. He emphasised the need to provide marginal, small, and medium enterprises with the space and resources to effectively display their products at these events.
“The participation of marginal, small, and medium enterprises is crucial at both national and international levels,” Mahbubul Alam said. “This will allow us to export Bangladesh’s promising products and open new markets.”
The FBCCI president informed that his organisation is actively discussing and collaborating with the government to make this a reality. He also proposed organising roadshows in neighbouring countries and Europe to revive the country’s handicraft industry and increase export opportunities for these products.
Standing Committee Chairman Nuruzzaman echoed Mahbubul Alam’s sentiments, highlighting Bangladesh’s vast potential and young population. “We need to move beyond the garment sector and focus on product diversification and market creation,” Nuruzzaman said.
Achieving this, he acknowledged, will require close collaboration with the Export Promotion Bureau, Ministry of Foreign Affairs, and Bangladesh Investment Development Authority.
FBCCI Senior Vice President Md Amin Helaly pledged the organisation’s support in facilitating increased exports through participation in foreign trade fairs. He stressed, however, the importance of raising awareness among Bangladeshis about the country’s diverse and promising products.
The meeting concluded with an open discussion where participants expressed keen interest in organising and participating in various sectoral fairs, both domestically and internationally, under the FBCCI’s umbrella.
