China searches for clearer signs of economic momentum
CHINA’S key economic data in the coming week is likely to show a pickup in growth after Beijing dropped its Covid Zero rules, though it’s not yet clear how solid or sustainable the recovery will be.
Official figures on Tuesday are expected to show gross domestic product grew 3.9 per cent in the first quarter compared to a year prior, according to the median estimate in a Bloomberg survey of economists.
While that would be an improvement on the 2.9 per cent expansion recorded in the October to December, it’s still below the official target for full-year growth of around 5 per cent.
March data is also expected to show increases in industrial output, investment and retail sales – though that’s partly due to the low base of comparison with March last year, when Shanghai, China’s largest city, was in lockdown.
Early indicators, meanwhile, have been mixed: while credit and export growth beat expectations last month, weak inflation suggested demand remains subdued.
Uncertainty over the strength of the data leaves open the debate of whether more stimulus is needed.
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Chinese officials have taken a pro-growth stance on the economy this year, though they’ve so far avoided aggressive easing measures such as cutting policy interest rates.
Instead, the People’s Bank of China in March injected more cash into the financial system to encourage lending. Government bond sales have also been strong as infrastructure investment is ramped up through front-loaded fiscal support.
Speculation is brewing, though, over whether China would consider a rate cut or other measures, such as fiscal support.
The central bank is expected to keep the rate on its one-year policy loans unchanged on Monday, but recent muted inflation figures suggest the PBOC will need to cut that rate in the second quarter by 10 basis points, David Qu of Bloomberg Economics wrote this week.
What Bloomberg Economics Says: “China’s first-quarter GDP will likely deliver clear evidence of recovery from the Covid-driven slump, powered by consumer spending and government stimulus.” BLOOMBERG
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