China's growth surges to record 18.3% in the first quarter

Shoppers visit a retail district in Beijing last week. Photo / AP

China's economic growth surged to 18.3 per cent over a year earlier in the first quarter of 2021 but an explosive rebound in factory and consumer activity following the coronavirus pandemic is levelling off.

The figures reported Friday were magnified by comparison with early 2020, when the world's second-largest economy suffered its deepest contraction in decades. Growth compared with the final quarter of 2020, when a recovery was under way, was only 0.6 per cent, among the past decade's lowest.

The latest headline figures "mask a sharp slowdown" as government stimulus is withdraw, said Julian Evans-Pritchard of Capital economics in a report. He said 0.6 per cent growth compared with the previous quarter was the past decade's second-lowest after the plunge at the start of 2020.

"China's post-Covid rebound is levelling off," Evans-Pritchard said.

Manufacturing and consumer activity has returned to normal since the ruling Communist Party declared victory over the coronavirus last March and allowed factories and stores to reopen. Restaurants and shopping malls are filling up, though visitors still are checked for the virus's telltale fever.

The economy "delivered a stable performance with a consolidated foundation and good momentum of growth," the National Bureau of Statistics said in a report.

The jump in growth was in line with expectations due to the low basis for comparison in early 2020. Then, the economy shrank by 6.8 per cent in the first quarter, China's worst performance since at least the mid-1960s.

Activity started to recover in the second quarter of 2020, when the economy expanded by 3.2 per cent over a year earlier. That accelerated to 4.9 per cent in the third quarter and 6.5 per cent in the final three months of the year.

For the full year, China eked out 2.3 per cent growth, becoming the only major economy to expand while United States, Europe and Japan struggled with renewed disease outbreaks.

Government data indicate consumer spending are accelerating while growth in factory output and investment are slowing.

First quarter retail spending rose 33.9 per cent over a year earlier, while growth in March rose to 34.2 per cent, according to the NBS. Factory output rose 24.5 per cent while investment in real estate, factories and other fixed assets rose 25.6 per cent.

Slowing manufacturing growth "implies a normalising growth path in the months ahead," said Chaoping Zhu of JP Morgan Asset Management in a report. "The focus should be on consumption data, which kept improving in March in comparison with the previous month."

Spending on restaurants jumped 75.8 per cent over a year ago, a period when most were closed for weeks. Online retail sales rose 29.9 per cent.

Overall growth shrugged off the impact of a government appeal to China's public to avoid travel during February's Lunar New Year holiday, usually the busiest travel and consumer spending period.

The International Monetary Fund and private sector forecasters expect economic growth to rise further this year to above 8 per cent. The ruling party's official growth target for the year is "above 6 per cent."

Still, some warn a Chinese recovery still isn't certain because global demand is weak as some governments re-impose anti-disease curbs that are disrupting business and trade.

March exports, reported earlier, rose 30.6 per cent over a year earlier as global consumer demand revived. Exports to the United States jumped 53.6 per cent despite tariff hikes still in place on Chinese goods in a trade war launched by former President Donald Trump.

Exporters and high-tech manufacturers face uncertainty about how President Joe Biden, who succeeded Trump in January, will handle conflicts over trade, technology and security. Biden says he wants better relations with Beijing but has given no sign tariff hikes or sanctions on Chinese companies including tech giant Huawei will be rolled back.

- AP