Spurt in Chinese growth in Jan-March ’23 quarter

One of the major concerns of global economy watchers has been the slowing of the economy in China. There was of course the major disruption caused by COVID-19 which broke out in Wuhan in China in November-December 2019, and spread to the whole world like a wildfire. Though China seemed to contain the pandemic initially through strict lockdown measures, there was a resurgence in 2022 and the Chinese authorities had adopted a zero-Covid policy, which caused much havoc in Chinese cities and villages and led to surprising outbreak of protests. It is after a long time then that Chinese economic growth showed positive results and cheered the Chinese and global markets.

The gross domestic growth product growth in the first three months of the year showed a positive 4.5 growth year-on-year, compared to the 2.9 per cent growth the previous quarter. Zhiwei Zhang, chief economist at Pinpoint Asset Management said, “Economic recovery is well on track. The bright spot is consumption, which is strengthening as household confidence improves. The strong export growth in March also likely helped to boost GDP growth in Q1.” National Bureau of Statistics (NBS) spokesman Fu Linghui acknowledged that it was a good start but cautioned that “the international environment is still complex and ever-changing, constraints from insufficient domestic demand are  obvious, and the foundation for economic recovery is not solid.”

But the 4.5 per cent GDP growth rate for Quarter 1 beat the analysts’ projection of 4 per cent growth. The expectation is that the second quarter GDP growth could be good based on the positive Q1 growth rate. The Chinese authorities have put the growth rate for the financial year at five per cent.  Analysts say that China will register a growth rate of 5.4 percent. There was a spurt in investment in infrastructure which stood at 8.8 per cent in January-march year-on-year, much higher than the 5.1 per cent of investment in fixed assets. Investment in property fell by 5.8 per cent. The trend was there was growth in services sector and in consumption, though there was no uptick in factory output because of subdued global demand. Experts are saying that unlike in the earlier period when growth was investment-driven, it is now fuelled by consumption. There is apprehension that global demand is still in the doldrums, and that the global economy has not yet fully recovered post-pandemic.  

Despite the political tensions between China and the United States and China and the European Union (EU) over Taiwan, Chinese economy seems all set to make a comeback with renewed growth rates. And there is the general recognition that Chinese economic recovery is crucial for global economic growth. The global economic growth rate will be better if the Chinese growth rate improves. Of course, there is a sense of irritation, specially among the Europeans, that the dependence on Chinese manufacturing is not a good thing. And that there is a need to diversify the global supply chain. Hence the desire to develop alternative supply sources in countries like India and Vietnam and others.

The Chinese leaders and policymakers remain unperturbed by the hostile Western attitudes and they pursue with single-minded devotion Chinese growth goals. The Chinese seem to believe that the advantage of cheap labour would remain with China for a long time. Secondly, the Chinese, along with cheap labour, allow the proliferation of cheap goods as well and foreign markets are flooded with cheap Chinese goods. India has announced that it would invoke the World Trade Organisation (WTO) device of quality control order to check the flow of cheap Chinese goods into the country. So, China’s economic growth is premised on many factors, and it seems to be succeeding in its strategy.