China soars to record growth but Covid recovery shows signs of slowing

A year after the Covid-19 stores pandemic and factories closed, China’s economy has been brought back to life.

The country’s gross domestic product rose 18.3 percent in the first quarter of this year compared to the same period last year, as announced on Friday.

This is the biggest jump from a year earlier since the National Bureau of Statistics in Beijing began publishing GDP figures in 1992.

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However, the increase fell short of expectations. A Reuters poll expected growth of 19 percent.

It also shows the extent to which the pandemic is slowing, from which the world’s second largest economy is still recovering.

In the first quarter of last year, the economy contracted 6.8 percent as the country experienced one of the strictest Covid lockdowns in the world to fight the rampant virus.

Compared to the last quarter of last year, China’s economy grew only 0.6 percent in the first three months of 2021, suggesting that the economic recovery is indeed slowing.

China posted 2.3 percent growth last year, making it the only major economy to expand while the US, Europe and Japan struggled with renewed virus outbreaks and lockdowns.

However, there are fears that the country’s real estate market is overheating and trading may continue to suffer from tensions with Washington that have continued since President Joe Biden took office.

New home prices rose at the fastest pace in months in March, and profits spread to more cities as blistering demand bucked government efforts to cool the housing market.Noel Celis / AFP – Getty Images

NBS spokeswoman Liu Aihua said the country had shown steady economic recovery in the first quarter, but added that there was “a high level of uncertainty” as the pandemic raged across the world.

“The basis for economic recovery is not certain, long-term structural inconsistencies still exist and there are even some new problems and circumstances in development,” she said.

Production, auto sales and consumer spending have all recovered to pre-pandemic levels since the ruling Communist Party declared victory over the virus and allowed factories and stores to reopen in March last year.

Restaurants and malls fill up, though visitors are still being screened for Covid’s tell-tale fever.

Figures released on Friday showed the retail sector grew 34.2 percent, a clear sign that Chinese consumers were returning to stores that were closed during the pandemic.

“Business is definitely going well,” said Zhang Ji, 27, who owns a clothing store in Beijing. “And business is also going well for all of my colleagues in the industry.”

Zhang said while his offline sales slowed during the pandemic, in-person and online sales have increased every month since June last year.

He said the business had been particularly strong since January. “The future is definitely bright,” he added.

Chinese consumer spending accelerates while production growth slows in factories like this Wuhan auto plant.AFP – Getty Images

Andrew Collier, managing director of Oriental Capital Research, said the country’s ability to get out of lockdown quickly was critical to its growth.

“China was able to close many parts of the country very quickly. As a result, they could get consumers to return money faster than was possible in Europe and the US, for example, ”said Collier.

Collier warned that while growth numbers are high, the “quality” of growth is lower.

Much of China’s economic recovery was due to heavy government investment in industries such as steel and concrete, which could jeopardize the country’s efforts to gear its economy towards domestic consumption and services.

“For every yuan they spend, they get less and less impact,” said Collier. “It’s a very crooked, heavily industrialized country that is growing more slowly.”

The Associated Press and Reuters contributed.

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