China’s economy surged 18.3% in the first quarter from a year earlier, a record rate of growth that reflected the recovery from a deep coronavirus-induced trough in early 2020 and the continued momentum of the world’s second largest economy.
The rate of gross domestic product growth in the first three months of 2021 was sharply higher than the 6.5% year-over-year growth recorded in the final quarter of 2020, though it fell short of the 19.2% growth expected by economists polled by The Wall Street Journal.
Analysts had anticipated GDP growth in the first three months of the year to jump sharply when compared with the year-earlier period, when the Chinese economy suffered a historic 6.8% contraction as the coronavirus’ initial emergence forced Beijing to shut down large swaths of the country.
In recent weeks, China has reported economic indicators showing growth of 30% or more from a year earlier. The year-over-year GDP growth rate will almost certainly trend lower in coming quarters as the Chinese economy is measured against higher levels from the year-earlier period. China’s economy began its recovery in the second quarter of 2020 and recorded higher year-over-year growth figures through the remaining quarters of the year.
The 18.3% year-over-year growth rate for the first quarter is the highest since China began reporting quarterly GDP in 1992, surpassing the 15.3% rate in the first quarter of 1993.
But stripping out the statistical distortion from last year’s low base of comparison, economists at HSBC in Hong Kong estimate that underlying year-over-year GDP growth in the first three months of 2021 was about 5.4%, lower than the pre-coronavirus trend of roughly 6% growth. The bank expects the economy to continue “running below full speed” in the coming months.
When compared with the last three months of 2020, the Chinese economy expanded just 0.6% in the first quarter of 2021, slowing from a newly revised 3.2% quarter-on-quarter GDP increase in the fourth quarter of 2020, according to data released Friday by the National Bureau of Statistics.
Beijing set a relatively modest 2021 growth target of 6% or higher, which leaves more room for officials to tackle rising debt levels and other financial risks. Economists polled by The Wall Street Journal expect the Chinese economy to grow 8.5% in 2021 from a year earlier.
The Chinese recovery now faces a raft of challenges as it enters a second year, including nascent signs of inflation, a lagging consumer recovery, worries about asset bubbles and rising geopolitical tensions that could hurt trade. Unemployment is also hovering near a ceiling that authorities have targeted, though Beijing’s most closely watched metric, the surveyed urban unemployment rate, eased to 5.3% in March from 5.5% a month earlier.
Also, longer-term demographic hurdles are also manifesting themselves, prompting officials to consider policies to increase the country’s rapidly falling birthrate.