Premier says economic growth is accelerating and the country can hit its 5% target this year
Chinese Premier Li Qiang gestures as he delivers his opening speech for the World Economic Forum’s Annual Meeting of the New Champions 2023, at the Meijiang Convention and Exhibition Center in northern China’s Tianjin Municipality, yesterday
China’s No. 2 leader said yesterday that economic growth accelerated in the latest quarter and expressed confidence it can hit the ruling Communist Party’s official target of 5% for the year.
Premier Li Qiang, speaking at a conference in the eastern city of Tianjin, gave no figure for the three months ending in June but said it was faster than the previous quarter’s 4.5%.
The world’s second-largest economy rebounded from 2022’s unusually weak 3% growth following the end of anti-virus controls on travel and business activity. But that faded faster than expected. Consumer and factory activity weakened in May and record-setting youth unemployment spiked up.
“It is expected that the second quarter will be faster than the first quarter,” Li said at the World Economic Forum. “We expect to achieve the economic growth rate of about 5% determined at the start of the year.”
Private sector forecasters expect China’s economic output to grow by at least 5% this year, but some have cut their outlooks following May’s weak activity.
Growth in retail sales decelerated in May to 12.7% over a year earlier, from the previous month’s 18.4%. Growth in factory output fell after interest rate hikes in the United States and Europe to cool inflation depressed demand for Chinese goods. May exports sank compared with a year earlier.
A government survey found unemployment among young people in cities spiked to a record 20.8%.
Meanwhile, Fitch Ratings recently raised China’s 2023 GDP forecast from 5.2% to 5.6% after a swifter-than-expected reopening rebound in the first quarter, as cited in a China Daily report.
“China’s reopening rebound was a lot stronger in the first quarter than we had anticipated,” said Brian Coulton, chief economist with Fitch Ratings, in the June Global Economic Outlook, a report released by the credit rating agency earlier this month.
China’s GDP expanded by 4.5% year-on-year in the first quarter, compared to an estimated 2.8% in a previous report issued by Fitch Ratings in March. Consumption, property sales and exports all recovered rapidly in February and March, said the credit rating agency.
Although the country’s monthly macro data releases for April and May slowed, the broader picture of a growth recovery driven by a normalization of consumer spending looks intact. Retail sales continued to expand robustly in May. PMI services balances remained well above 50 and consumer confidence surveys have started to recover, said Fitch Ratings.
Moreover, household income prospects will continue to improve as labor demand recovers and the unemployment rate falls. Also, there are some signs of stabilization in the property sector. Housing completions have picked up sharply, suggesting that work on stalled projects has resumed. This matters for restoring buyer confidence given the dominance of pre-sales in the market for new housing, said the credit rating agency.
“The authorities’ willingness to provide some macro policy stimulus to support growth also looks to be increasing. The People’s Bank of China cut the seven-day reverse repo rate and the one-year medium-term lending facility and loan prime rates by 10 basis points in June. Further cuts in banks’ reserve requirement ratios also look likely after the recent dip in credit growth. With consumption recovering and the drag from falling construction activity easing, domestic demand growth will pick up in 2023,” said Fitch Ratings. MDT/Agencies
