China’s reopening unleashes burst of economic growth

April 18 (UPI) — China’s National Bureau of Statistics said Tuesday a strong performance by the services sector helped the world’s second-largest economy grow by an estimated 4.5% in the first quarter, in line with expectations.

GDP topped $4.15 trillion in the January-to-March period and was 2.2% higher than in the fourth quarter of 2022, with heavy industry, agriculture and manufacturing making the largest contributions after services, according to the agency’s preliminary estimates.

The bureau said the government had achieved its goal of achieving a “smooth transition” from its COVID-19 prevention and control imperative to a new stable growth phase in a relatively short time.

Consumer Price Inflation came in at 1.3%, driven predominantly by prices of food and alcohol, while unemployment stood at 5.3% with the overall figure driven up by a 16-24 unemployment rate of almost 20%.

However, GDP growth was among the worst in recent memory — growth ran 6%-7% prior to 2020 — following three years of pandemic-related shutdowns and restrictions on China’s $16 trillion economy, which were lifted in December.

The economy grew by just 3% last year, according to the International Monetary Fund, sparking fears the jump in the pace of growth from the fourth quarter is a rebound of a magnitude that may not be sustainable for an export-oriented economy in a world where global growth is slowing.

“What’s more likely to happen in the coming months is that people might get over the initial high after the reopening,” Hang Seng Bank Chief Economist Dan Wang told the BBC.

“Manufacturing demand might decline, which cannot sustain a boom in exports because the global economy is slowing down rather than speeding up.”

In its Global Economic Outlook last week, the IMF forecast China’s economy would grow by 5.2% this year before easing to 4.5% in 2024 while the world economy will be growing at slightly more than half those rates.

Beijing last month sought to temper expectations by projecting 2023 growth would be 5%, with authorities warning of the impact of “headwinds” from Russia’s invasion of Ukraine and the prolonged period of strict “zero-COVID” policies.

Premier Li Keqiang identified the twin problems of “insufficient” domestic demand and unemployment, saying that the government needed to create 12 million jobs in towns and cities in 2023 to boost consumption.

Li has been trying for years to rebalance the economy away from an overdependence on exports and create a more sustainable domestic consumption-led economy.