China‘s economy rebounded faster than expected in the first quarter of 2021, with official figures showing gross domestic product (GDP) growth of 4.5% compared to the same period last year. The boost in economic activity was driven by rising household spending and factory output, according to the data released on Tuesday.
The main indicator of household consumption from March retail sales, jumped by 10.6% year-on-year, while output from the country’s factories rose by 3.9%, although it slightly missed forecasts.
The recovery was attributed to the lifting of COVID restrictions, which Beijing pledged to do in December. The country resumed processing visa applications in March after announcing a major easing of restrictions.
Strong economic rebound
There was also evidence of a strong rebound for the country’s airline industry, with more than 45 million air passenger trips taken last month, an almost threefold increase on the same period last year.
Investors had been eagerly waiting for the figures to gauge the strength of China’s recovery after the government lifted coronavirus measures. However, one analyst cautioned that the pace of growth was unlikely to continue.
“What’s more likely to happen in the coming months is that people might get over the initial high after the reopening,” Dan Wang, chief economist at Hang Seng Bank (China) said. “Manufacturing demand might decline, which cannot sustain a boom in exports because the global economy is slowing down rather than speeding up,” she added.
Authorities, including the People’s Bank of China, have promised to increase support for China’s economy to help curb unemployment but are limited in what measures they can take. Beijing has also eased a three-year-long crackdown on big technology companies and property developers. Last year, China’s GDP growth slumped to one of the lowest levels in nearly half a century due to coronavirus measures.
GDP is a crucial tool for assessing how well an economy is doing, as it helps businesses determine when to expand and hire more people, and allows governments to determine how much to tax and spend. The latest figures suggest that China’s economy is on the path to recovery, although the outlook remains uncertain.
It is worth noting that the accuracy of China’s economic data has been questioned in the past, with some analysts claiming that the country’s official figures may overstate growth. However, it is difficult to determine the extent to which this may be the case, and the Chinese government has repeatedly defended its data.
The rebound in China’s economy is significant not only for the country itself but also for the rest of the world, as China is the world’s second-largest economy and a major trading partner for many countries. The recovery may provide a much-needed boost to global economic growth, although uncertainties remain, including the ongoing Covid-19 pandemic and geopolitical tensions between China and other countries.
China’s economy rebounded faster than expected in the first quarter of 2021, driven by rising household spending and factory output. However, analysts caution that the pace of growth is unlikely to continue, as manufacturing demand may decline and the global economy is slowing down.
The accuracy of China’s economic data has been questioned in the past, but it is difficult to determine the extent to which this may be the case. The recovery in China’s economy is significant for the rest of the world, although uncertainties remain.