China's economy grows at 5.3% in first quarter amid property market downturn

China Q1 GDP growth: China's economy kicked off 2024 with stronger-than-expected growth, expanding at a rate of 5.3 per cent in the first quarter despite ongoing challenges in its property market and looming trade tensions with the West.

Data released by the National Bureau of Statistics (NBS) revealed that the country's gross domestic product (GDP) reached 29.63 trillion yuan (about $4.17 trillion) in the first three months of the year, representing a notable acceleration from the 5.2 per cent growth recorded in 2023. This performance indicates that China is on track to meet the government's target of around five per cent GDP growth for the year.

During a press conference, Sheng Laiyun, Deputy Head of the NBS, attributed the robust economic expansion to various positive factors, including rising production demand, stable employment, and growing market confidence. He highlighted the resilience of China's high-quality development, noting that the economy has sustained its recovery momentum and started the year on a solid footing.

The GDP growth was mainly driven by a rebound in the industrial sector and improvements in the service sector, according to Sheng. However, he refrained from addressing the ongoing crisis in the property sector, which accounts for a significant portion of China's economy. Home prices have been declining, and property investment fell by 9.5 per cent during the same period, underscoring the challenges faced by real estate firms in the country.

Analysts, such as Harry Murphy Cruise from Moody's Analytics, stressed on the importance of household consumption in sustaining China's growth trajectory. Cruise warned that relying solely on manufacturing growth is not sustainable in the long run and urged for increased consumer participation to achieve the growth targets.

The real estate industry crisis came into the spotlight in January when property giant Evergrande was ordered to liquidate by a Hong Kong court. Other major developers, including Country Garden and Shimao, have also faced financial difficulties, further exacerbating concerns about the stability of China's property market.

Adding to the economic challenges, Fitch Ratings recently downgraded its outlook for China's state-owned banks from stable to negative. The downgrade reflects increasing risks to the country's financial stability and underscores doubts about Beijing's ability to support its largest lenders amid economic headwinds.

Despite these challenges, the first-quarter growth was fuelled by rapid expansion in the services sector and strong export growth in the industrial sector, according to Ding Shuang, chief Greater China economist at Standard Chartered Bank. However, Shuang warned of potential trade friction with the West, including the possibility of additional tariffs, particularly as the United States has accused China of overcapacity issues.

(With PTI inputs)