China's economy grew stronger than expected at the start of this year, mainly thanks to robust growth in high-tech manufacturing.
Gross domestic product (GDP) grew by 5.3% in the first quarter from a year ago, according to the National Bureau of Statistics on Tuesday. That beat the estimate of 4.6% growth from a Reuters poll of economists. It also marked an acceleration from the 5.2% growth in the previous three months.
"The Chinese economy got off to a good start in the first quarter … laying a good foundation for achieving the goals for the whole year," said Sheng Laiyun, a spokesperson for the NBS, at a press conference in Beijing accompanying the data release.
But he acknowledged that "the foundation for economic stability and improvement is not yet solid."
Industrial production jumped 6.1% in the first quarter from a year ago, boosted by strong growth in high-tech manufacturing.
In particular, the production of 3D printing equipment, charging stations for electric vehicles (EVs) and electronic components all surged about 40% compared to a year earlier.
Last month, an official survey showed China's manufacturing purchasing managers' index (PMI) expanded for the first time in six months. The Caixin/S&P manufacturing PMI, a privately run survey, also hit its strongest reading in more than a year, as overseas demand picked up.
China has set an annual growth target of around 5% for 2024, which many analysts considered ambitious, as consumer and business confidence remains weak and the real estate sector is mired in a prolonged downturn.
The authorities have cut interest rates this year to boost bank lending and speed up central government spending to support infrastructure investment.
"The economy appears within reach to meet the official target of 'around 5%' GDP growth in 2024," Frederic Neumann, chief Asia economist for HSBC, told CNN.
Tuesday's data showed that retail sales grew 4.7% in the January-to-March period, boosted by spending in sports and entertainment activities, cigarettes and alcohol, as well as catering services.
Investment in fixed assets — such as factories, roads and power grids — increased 4.5% during the same period.
But there are plenty of concerns still.
"There's a growing mismatch in China's economy; manufacturers are doing the heavy lifting, while households sit on the sidelines," said Harry Murphy Cruise, an economist at Moody's Analytics.
Much of the good news in manufacturing comes from China's "new three" industries: EVs, solar panels and batteries.
"Officials have spent big to support these strategic industries, and are reaping the rewards as production takes off and exports — particularly for EVs — surge amid a broader pullback in global demand," Cruise said.
But the strategy isn't without risks.
There is growing angst in the United States and European Union that China's overcapacity in these areas is flooding global markets and hindering their domestic industries.
Comments by US Treasury Secretary Janet Yellen on her visit to China last week highlight America's willingness to intervene with tariffs, if it deems them necessary.
"Were that to occur, China's manufacturing bright spot would be dampened," Cruise said.
Keeping reading about China's economic challenges.
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