Steady growth despite trade tension
China’s economy recorded steady growth in the first quarter this year, demonstrating its resilience amid escalating trade tensions with the United States.
First-quarter gross domestic product rose 6.8 percent year on year to 19.87 trillion yuan (US$3.2 trillion), unchanged from the growth in the fourth quarter of 2017, National Bureau of Statistics data showed yesterday.
“The economy is off to a good start,” statistics bureau spokesman Xing Zhihong said, noting that the quarterly performance laid a good foundation for sustained, healthy growth for the whole year.
The GDP growth rate has stayed within the range of 6.7 percent to 6.9 percent for 11 consecutive quarters, with the jobless rate and inflation remaining stable, Xing said.
The solid first-quarter performance extended the economic strength of last year, when China’s GDP logged 6.9 percent growth, picking up the pace for the first time in seven years.
The bureau, meanwhile, released the monthly survey-based urban unemployment rate for the first time. The unemployment rate was 5 percent, 5 percent and 5.1 percent in January, February and March respectively, all in the target range of below 5.5 percent for this year.
Nomura said the “bright spot” was retail sales, whose growth accelerated to 10.1 percent in March from 9.7 percent over January-February. “This is a good sign that growth is rebalancing from investment to consumption,” Nomura said.
“Indeed, underneath the very stable GDP growth over the past five quarters has been a continued rapid rebalancing, from old economy industrial sectors and investment toward new economy sectors like tech and services, as well as consumption.”
The transition was part of China’s bid to steer its economy toward high-quality development rather than growth based on inefficient investment, low-end exports and polluting factories.
Services accounted for 56.6 percent of the economy and 61.6 percent of its growth in the first quarter, the bureau said.
Meanwhile, new businesses and industries continued to grow fast, and the industrial sector steadily upgraded toward medium and high-end production, according to Xing.
The structural shift of China’s economy is also key to its effort to cope with pressure from rising protectionism, a threat highlighted by the spokesman.
The biggest difficulty facing China’s economy “is uncertainty in the international environment,” he said. China is “fully capable” of handling trade tensions with the US, citing the country’s increasingly domestic-led growth, growing innovative edge, and ample room for development and policy control, Xing added.
“The economy has plenty of resilience, potential and leeway. The Sino-US trade frictions cannot stump the Chinese economy, nor can they change its sound momentum of sustained and healthy growth,” he told reporters.
As an upgrading market in China increases demand for high-quality products, domestic sales can partially offset the adverse impact of external factors, said Wang Changlin, an economist at the National Development and Reform Commission.
Domestic demand contributed 105.7 percent of China’s economic growth on average annually from 2008 to 2017, Xing said.
While drawing attention to a narrowing trade surplus, Xing said the country is opening up further.
China earlier this month unveiled a number of landmark measures to be taken this year to significantly broaden market access, from significantly lowering import tariffs for vehicles to opening up the financial sector.
In the first quarter, industrial output rose 6.8 percent year on year, with the growth unchanged from a year earlier and 0.4 percentage points lower than in January-February.
January-March fixed-asset investment growth slowed to 7.5 percent, below 7.9 percent in January-February.
Xing attributed the moderation of some indicators to seasonal factors as the Spring Festival came later this year than previous years and affected production.
“Looking ahead, the favorable conditions and factors to support high-quality development are increasing, and the economy will continue to maintain stable development with a positive outlook,” he said.
Zhang Zhanbin, an economist at the Chinese Academy of Governance said China will fulfill its goal of achieving GDP growth of around 6.5 percent this year.
Australia and New Zealand Banking Group said China’s economic momentum remains solid in the first three months.
“On a year on year basis, China’s GDP increased 6.8 percent, on par with the fourth quarter of 2017. This will provide a cushion to a likely moderation in GDP growth in the second half of this year amid the country’s intensive reform efforts,” said Betty Wang, senior China economist of ANZ.