China Reports Unexpected 6.4% GDP Growth In Q1

Q1 2019 growth
Containers on a Chinesee ship (Photo: Reuters)

Bucking sustained headwinds, China's economy posted a surprising 6.4 percent growth in its GDP during the first quarter. Western analysts were expecting growth to hit 6.4 percent.

Despite this buoyant number, China's growth still lags behind that of 2018. China's economy grew 6.4 percent year-on-year in the fourth quarter of 2018, and 6.8 percent in the first quarter of the same year.

Among the many indicators released by China Wednesday showed:

* Industrial production rising 8.5 percent year-on-year in March, the fastest growth since July 2014.

* Retail sales for March growing by 8.7 percent year-on-year, beating Reuters' projection of 8.4 percent.

* Fixed asset investment in the first quarter improving by 6.3 percent year-on-year, in line with expectations.

China's National Bureau of Statistics (NBS), which released the economic data, said that while there are a number of positive signals, the Chinese economy still faces downward pressure coming from the external environment. This is an obvious reference to Trump's trade war and the weaker global economy.

U.S. economists forecast a recession in either 2020 or 2021 as a result of the stubborn headwinds battering world economies.

Western analysts attributed the mostly better-than-expected Q1 numbers to the massive direct and indirect stimulus measures taken by Beijing to prop up the sagging economy.

"I think that policy impact is really taking effect now," said Yifan Hu, regional chief investment officer, and chief China economist at UBS Global Wealth Management.

She expects Chinese leaders to introduce more supportive policies because uncertainties surrounding trade have stubbornly refused to be mitigated. The U.S. and China are currently negotiating a trade deal, which seems to be making scant progress despite optimistic statements to media by both sides.

"Negotiations are continuing. We saw positive signs but we still have to be fully aware of the uncertainties and the volatility that that could bring later on," said Hu.

There is mounting concern among China's financial sector the People's Bank of China will hold in abeyance further monetary easing to avoid accumulating massive debt once again. Analysts said the growth target this year ranges from 6% to 6.5%, and the Q1 number is already reaching the top end of this range.

China massive stimulus measures saw China report much higher than expected exports in March and unexpected growth in the country's manufacturing activity. This data led several experts to suggest China's economy might have hit bottom and might be recovering.

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