China's Economy Expanded 5.3% In the First Quarter, Retail Sales and Industrial Production Struggled

Li Chen
16 Apr, 2024
Hong Kong

Markets in Asia generally traded lower, and the benchmark indexes in Tokyo and Seoul declined 2.1% and 2.4%, respectively, tracking losses on Wall Street. 

Benchmark indexes in Shanghai and Hong Kong fell over 1.7% after China's gross domestic product figure in the first quarter surpassed expectations, but retail sales and industrial production data fell short of market expectations. 

Gross domestic product in the first quarter rose 5.3%, following the 5.2% increase in the fourth quarter of last year. 

The steady rebound in the service sector and rising exports boosted economic growth in the first quarter. 

China's economy expanded 1.6% in the first quarter from the previous quarter, when it grew 1.2%. 

Despite the rebound in the service sector, economists are worried that China's economic growth is likely to lag behind the government's target rate of 5% increase in 2024. 

Retail sales, industrial production, and property prices showed an uneven and fragile economic recovery in the first quarter. 

Retail sales rose less-than-expected 3.1%, and industrial production advanced 4.5% in March from a year ago, respectively.

On a monthly basis, retail sales rose 0.26% from the previous month, and industrial production dropped by 0.08% from February, when activities were disrupted because of the Lunar New Year. 

Fixed asset investment increased 4.5%, and property investment declined 9.5% amid an ongoing slump in the residential property market. 

The unemployment rate in urban areas increased to 5.2% in the first quarter, compared to an increase of 5.3% in the first two months of the year. 

China's economic data are generally viewed with a lot of skepticism by international investors, as state-controlled businesses and local provincial governments lack transparency and verifiable processes in economic data collection. 

The CSI 300 index declined 1.0% to 3,512.89, and the Hang Seng index dropped 1.9% to 16,279.56. 

Real estate developers fell after home prices fell 0.34% in March from the previous month and extended losses to the tenth month in a row. 

Longfor Group dropped 3.1% to HK$9.10, China Resources Land decreased 3% to $22.60, and China Vanke decreased 2.4% to $3.73. 

So far in the year, the Hang Seng index is down 3.3% and the CSI 300 index has advanced 3.2%, indicating diverging market sentiment in two markets.