China's economic rebound takes off as COVID restrictions cease

China's economic recovery picks up speed as COVID curbs end

China's economy is recovering from a crippling pandemic slump with the end of COVID curbs in the first quarter, though some headwinds remain.

National Bureau of Statistics data showed on April 18 that gross domestic product grew 4.5 percent year on year in the first three months of 2023, faster than the 2.9 percent growth in the previous quarter.

A three-year crackdown on tech firms and property has been eased in December after Beijing lifted COVID curbs and eased COVID curbs in December.

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The recovery in China has, so far, been uneven, with consumption, services and infrastructure spending growing but prices slowing and bank savings surging.

As a quarter-on-quarter comparison, GDP grew 2.2 percent in January-March, up from a revised 0.6 percent increase in the previous quarter.

As the economy recovers from one of its worst performances in nearly half a century caused by COVID curbs, Beijing has pledged to step up support.

According to the Chinese central bank, it will maintain adequate liquidity, stabilise growth and jobs, and expand demand.

Through its medium-term lending facility, the central bank extended liquidity support to banks on April 18, but kept the interest rate unchanged, which indicates authorities are not overly concerned about the immediate growth outlook.

The Reuters poll of analysts predicts China's growth will accelerate to 5.4 percent in 2023 from 3 percent in the previous year. The government has set a modest economic growth target of around 5 percent for this year, after failing to meet its 2022 target.

For the first time this year, the central bank lowered reserve requirements for lenders in March, and the government unveiled additional fiscal stimulus measures.

Data on March activity released on April 18 showed retail sales growth accelerated to 10.6 percent, exceeding expectations and hitting a near two-year high, while factory output growth also accelerated but was just below expectations.

"The current market concerns about deflation largely reflect concerns about the strength and sustainability of the economic recovery," Wen Bin, chief economist at China Minsheng Bank, said in a research note.

"After the optimisation of epidemic prevention and control, the production side has basically returned to the pre-epidemic level, but the demand side momentum is still weak."

(With Input from Reuters)