May 29, 2024

Global Impact: China posts better-than-expected first-quarter growth, but US trade actions test outlook

Beijing responded to the news with strong protests, calling the proposed action “typical protectionism” that could disrupt global supply chains and vowing to take all necessary retaliatory measures.

On Friday, China imposed anti-dumping penalties against US propanoic acid imports after concluding an investigation that had started in July.

The sanctions may also weigh on China’s economic recovery.

On the bright side, investment has been the driver of growth, while net exports contributed 0.8 percentage points to the gross domestic product growth rate, reversing the negative trends seen last year.

Meanwhile, Chinese exporters are embracing a rosy year as more overseas buyers have returned to the Canton Fair – a barometer of exports – with an appetite for green energy products.

But China’s trade outlook is likely to be overshadowed by the escalation of trade tensions, as the European Union and the US continue to exert pressure on Beijing over the question of overcapacity.

China is aiming to keep growth at 5% in 2024. Are the odds in its favour?

Growth in China’s industrial output and retail sales in March fell short of expectations, while property sector investment has yet to bottom out as it dipped more than expected, casting a cloud over the recovery trajectory for the coming months.

The overall jobless rate in China remained stable at 5.2 per cent, while the unemployment reading for those aged 16-24 remained at an elevated level of 15.3 per cent.

More worrying, the jobless rate for the 25-29 age group rose to 7.2 per cent from 6.4 per cent in the previous month.

Adding to these concerns, industrial capacity utilisation fell to 73.6 per cent in the first quarter, hitting its lowest level since 2020.

Discussion of the overcapacity issue, now centred on products in the new energy sector such as electric vehicles (EVs), have driven China’s relations with the EU to new lows after Brussels launched trade probes into Chinese EVs and wind turbines over subsidy and overcapacity worries.

Beijing has pushed back against the accusations, insisting that China’s leading position in the new energy sector is as a result of sufficient competition instead of government subsidies.

that capacity is decided by supply and demand, while a moderate oversupply would facilitate competition and lead to “survival of the fittest”.

But the issue has been highly politicised, now more than just a domestic and economic problem and a potential catalyst for further tensions and restrictions.

These challenges will all serve as hurdles Beijing will have to clear as it seeks to mitigate conflict in its external relations while spearheading the technological advancement necessary to power its economy.

60-Second Catch-up

Deep dives

Illustration: Henry Wong

China’s goal of powering economy through consumers won’t be easy: analysts

  • Ahead of China’s quarterly GDP release, survey figures reflect how difficult times have been for half a billion Chinese people, and where their priorities now lie

  • Even economic bright spots such as EV manufacturing have cast a long shadow of uncertainty, shrouding an outlook already marred by property and spending woes

First they came for Zibo’s barbecues. Then they returned in droves for the stunning ice sculptures of Harbin. After that, numbing noodles put Tianshui’s hotpot on their radar and palates.

Now Chinese tourists are flocking to Chengdu to catch a glimpse of cherry blossoms and rapeseed flowers in full bloom.

Illustration: Lau Ka-kuen

China is aiming to keep growth at 5% in 2024. Are the odds in its favour?

  • Beijing has defended its ambitious goal of growing the economy by ‘around 5 per cent’ this year, insisting it matches China’s potential for economic growth

  • Analysts say China must roll out proactive fiscal policies and a ‘flexible and appropriate’ monetary policy, while also fixing the ailing property market

For He Bin, a car dealer in eastern China’s Zhejiang province, 2024 is not expected to be an easy year despite Beijing’s pledge to again keep economic growth at “around 5 per cent”.

After last year represented a year of a shaky post-pandemic recovery, Beijing’s 2024 growth target is widely believed to have been set to shore up confidence at home, and also dismiss international doubts over China’s prospects.

Photo: EPA-EFE

‘Don’t put too many eggs in 1 basket’: 7 takeaways from China’s GDP, March data

  • China’s widely watched gross domestic product (GDP) figure beat expectations in the first three months of the year, rising by 5.3 per cent compared to a year earlier

  • Retail sales growth dropped to 3.1 per cent in March, while property investment fell by 9.5 per cent in the first quarter

Photo: Xinhua

China’s premier solicits views from ‘ambassadors of friendship’ as tensions grow

  • Premier Li Qiang tells overseas buyers at the Canton Fair that China’s development will inject more stability into the world economy and global trade

  • Beijing is seeking to shore up confidence and retain and entice investors, although it is facing de-risking and decoupling, as well as fresh trade probes and tariff threats

Premier Li Qiang promised overseas buyers at China’s major trade fair that Beijing would do its utmost to facilitate international commerce and investments, and also deepen opening-up, despite new external headwinds.

“I hope foreign businesses can continue to invest in China, explore and cultivate the market and capture the abundant opportunities in China’s massive market and its development,” Li said at the China Import and Export Fair in Guangzhou on Wednesday.

Photo: Bloomberg

‘External demand story appears’: 5 takeaways from China’s March trade data

  • China’s exports fell by 7.5 per cent in March compared to a year earlier due to a higher base of comparison

  • Imports also fell short of expectations and declined by 1.9 per cent year on year compared to the same period last year

Photo: Xinhua

‘A long-term phenomenon’: 4 takeaways from China’s March inflation data

  • China’s consumer price index (CPI) grew by 0.1 per cent in March year on year, although analysts said it was still ‘trending upwards’

  • Producer price index (PPI) fell for the 18th month in a row, dropping by 2.8 per cent in March from a year earlier

China’s consumer price index (CPI) grew by 0.1 per cent year on year in March, lower than the average 0.3 per cent estimate from economists polled by Chinese financial data provider Wind and still well below the 2024 inflation target of 3 per cent.

Global Impact is a weekly curated newsletter featuring a news topic originating in China with a significant macro impact for our newsreaders around the world.

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