China will announce on Tuesday its first quarterly Gross Domestic Product (GDP) data since the end of health restrictions against COVID. The figure is expected to mark a rebound in the world’s second-largest economy, although the recovery will be gradual due to weak consumer confidence, according to Larry Hu, chief China economist at investment bank Macquarie. Analysts consulted by AFP point to average growth of 3.8% year-on-year between January and March.
However, the world’s second-largest economy continues to face other crises, from real estate debt to weakening consumer confidence, global inflation, and the threat of recession in other parts of the world. The real estate sector, which together with construction accounts for about a quarter of China’s GDP, continues to pose challenges to economic growth, according to Teeuwe Mevissen, an analyst at Rabobank. Official aid helped stabilize prices in March, but weak demand plagued a sector already hit by falling house prices and huge debt that left some developers fighting for survival.
Economists will also be keeping a close eye on the March retail trade data, the main gauge of household consumption. Retail sales rebounded in January and February after four successive months of contraction, according to official figures. However, nearly 60% of urban households continue to prioritize savings over investment or spending, according to a survey by China’s central bank. Consumer confidence remains in negative territory, despite the abolition of health restrictions, according to Harry Murphy Cruise, a macroeconomist specializing in the Asia-Pacific region at Moody’s rating agency.
Beijing has set a comparatively modest growth target of around 5% this year, a goal that the country’s premier, Li Qiang, has already warned could be difficult to achieve. Analysts forecast that China’s economy will grow by an average of 5.3% this year, although the global backdrop could continue to weigh on China’s recovery, particularly geopolitical tensions with the United States, the threat of recession in other major economies, and runaway inflation globally. In summary, although China’s GDP is expected to rebound in the first quarter of 2023, the Chinese economy continues to face a number of shocks that could affect its recovery.