Key Takeaways

  •  Despite mixed monthly data for March, Chinese Q1 GDP beat expectations, rising 5.3% year over year and 1.6% quarter over quarter (non-annualised).
  • This was mainly due to the traditional engines of the country’s growth – specifically trade and investment. But consumers also helped, with a reasonable showing across retail and services.
  • The pace of expansion remains uncertain, as our China Activity Indicator (CAI) implies that activity eased off its blistering pace in March. Property indicators also continue to paint a downbeat picture.
  • Even if there are reasons why some payback from Q1’s strength could temper GDP growth through the remainder of 2024, statistical revisions make it easier for the authorities to hit their “around 5%” growth target. 
  • Policy also continues to gain traction, helped by a recovery in China’s real equilibrium interest rate (r*). Our China Financial Conditions Index (CFCI) has been revised higher and now looks more akin to the early stages of the 2016 loosening. 
  • We do not expect prolonged easing on the scale of 2016. The weak nominal environment and challenges in the real estate sector point to some additional policy easing, but the strong start to 2024 and the focus on national security suggest this could now be toned down.
  • We have increased our 2024 growth forecast to 5.1%, implying the authorities’ “around 5%” growth target will be met. 

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