Following China’s better-than-expected economic performance in the first quarter, international investment banks raised their growth predictions for the country's annual gross domestic product.
Citigroup revised its forecast for China’s GDP growth this year to 6.4 percent from 5.7 percent, while J.P. Morgan Chase raised its to 6 percent from 5.5 percent. UBS Group and Nomura lifted theirs to 5.7 percent and 5.5 percent from 5.4 percent and 5.3 percent, respectively.
China is targeting “about 5 percent” growth for 2023.
GDP expanded 4.5 percent in the first quarter from a year earlier, beating the 4 percent average prediction of chief economists surveyed by Yicai Global. The recovery in exports and consumption was also better than expected in the three months ended March 31, and property sales and fixed-asset investment continued to pick up, though industrial production remained weak.
But the quality of this round of economic recovery in China will depend on this quarter's performance, some analysts at the foreign banks noted.
Second-quarter GDP is expected to jump 7.6 percent because the Covid-19 pandemic led to a significant decline in growth in the same period last year, and the recovery of the offline services sector is accelerating, Lu Ting, chief China economist at Nomura, told Yicai Global.
Retail sales of consumer goods and the real estate market may continue to revive this quarter, given the low base in April and May last year, but quarter-on-quarter economic momentum may slow, especially in terms of property sales, new construction, and consumption demand, said Wang Tao, chief China economist and head of Asian economic research at UBS.
March’s retail sales were quite solid, but industrial production and investment fell short, Zhao Yaoting, global market strategist at Invesco Asia Pacific (ex-Japan), told Yicai Global. Moreover, the prospects for the property market are still uncertain after sales volume and prices bounced back in first-tier cities, Zhao added.
The higher-than-expected 10.6 percent growth in retail sales of consumer goods last month was partly due to the low base figure in March last year, Wang Qiangsong, head of the research division at Nanyin Wealth Management, said to Yicai Global. The damage to residents' medium- and long-term incomes from the pandemic still has a notable impact on consumption, Wang added.
China needs to introduce targeted policies to boost confidence on incomes as the surveyed urban jobless rate was unchanged at 5.3 percent last month, with the figure among residents aged between 16 and 24 rising 1.5 points to 19.6 percent from February, Wang pointed out.