Lunar New Year spending drives China’s economy to 5.3% growth in first quarter

China’s economy expanded by 5.3% in the first quarter compared to a year earlier, surpassing analyst expectations and signaling a strong start to the year. The growth was supported by government initiatives aimed at boosting economic demand in the country. Despite this positive outlook, there were concerns about the Chinese property crisis which continued to weigh on overall growth.

The National Bureau of Statistics in China noted that while the economy had a good start in the first quarter, economic stability was still not firmly established. The country has been facing challenges like a slowdown in demand and a prolonged property crisis, with major real estate companies defaulting on their debts in recent years. This has had a negative impact on property investment, which fell by 9.5% year-on-year in the last quarter.

Despite the challenges in the property sector, China’s industrial output posted strong growth, increasing by 6.1% compared to the same period last year. Retail sales also showed a positive trend, growing at an annual pace of 4.7%, while fixed investment in factories and equipment rose by 4.5%. The Lunar New Year celebrations at the beginning of the year likely contributed to increased household spending in the last quarter.

While there were positive indicators of growth, imports and exports in March were down compared to the same month last year, with exports falling by 7.5%. Despite these challenges, Chinese policymakers have set a GDP growth target of 5% for the year, reflecting an ambitious goal in the current economic context. The latest economic data coincided with a visit by German Chancellor Olaf Scholz to China, where he held talks with President Xi Jinping.