Fundamentals of Economy Remain Strong Despite Pressure Ahead

China’s economic data for the first quarter of this year were released on Monday, showing the country’s GDP grew by a year-on-year rate of 4.8% in the past three months, beating estimates by a considerable margin. While fixed-asset investment and industrial output also beat expectations, consumer spending took an inevitable hit.

Disregarding the latter figures, the data come amid predictions by international economists that China’s growth would in fact slow down this year as a result of other structural pressures, including the moderation of the global recovery from the pandemic, the conflict in Ukraine and its impact on commodity and energy prices, as well as the stress of real estate and technology readjustments.

The data suggest that China has handled the challenges of the past few months quite well. However, the COVID-19 outbreaks that have followed may pose new hurdles for the year ahead, especially concerning the 5.5% growth target that has been set. Nevertheless, these results are already better than expected.

While we should expect China to stick to its current pandemic prevention and control measures for the foreseeable future, the national economy performed better than expected, and the country is prepared to offset disruptions with appropriate measures. This is in line with how the central authorities have always aimed to seek to contain the spread of the virus at the minimum cost to the economy.

In the face of COVID-19 resurgences in some parts of the country and uncertainties in the external environment, it is true to say that there is mounting downward pressure on China’s economy and the future picture doesn’t appear too rosy either. That’s especially true when it comes to the COVID-19 outbreak in Shanghai – China’s financial and logistics hub. Such impact will undoubtedly affect the country’s economic performance in the second quarter of this year.

However, there is no reason to assume the economic losses from this period will be permanent. Despite the challenges ahead, the data for Q1 have ultimately shown the fundamentals of China’s economy are strong and moving in the right direction.

Governments and departments at all levels are expected to ramp up efforts to maintain the stability of socioeconomic growth in the days to come while containing COVID-19. In this regard, more proactive policies are ultimately expected to be adopted in terms of a possible targeted stimulus aimed at facilitating business and consumption, as well as ensuring employment and people’s livelihoods.