The China Beige Book, a U.S.-based research firm, reported that China’s economy is ending the first quarter on a strong note. This is in part due to improvements in industrial activity and retail spending. Official data on retail sales, industrial production, and fixed asset investment for January and February exceeded expectations, with figures typically reported together to account for the Lunar New Year holiday. The survey included 1,436 businesses, split between state-owned and non-state-owned firms, and indicated that revenue growth accelerated in March while pricing gains boosted margins.
The National Bureau of Statistics is set to release first quarter data on April 16, and China has announced a target growth rate of around 5% for the year, which some analysts see as ambitious given the current level of announced government stimulus. The China Beige Book observed that businesses have pulled back on borrowing due to higher interest rates, but also noted signs of a pause in lending activity. The report highlights the substantial policy easing that has been tracked over the past year and suggests that some lenders may be hitting the brakes in response.
The report also noted improvements in employment, with hiring experiencing its longest stretch of improvement since late 2020. Job growth increased in every sector except for services, and retail spending saw growth in all sub-sectors except for luxury goods. In the real estate sector, while residential sales continued to decline, commercial sales and construction showed significant improvement. Manufacturing experienced growth in production and domestic orders from February, though export orders decreased.
Official data indicated a 9% decline in real estate investment in the first two months of the year compared to the previous year. However, investment in infrastructure rose by 6.3%, and manufacturing saw a 9.4% increase. The China Beige Book highlighted the ongoing recovery in certain sectors of the economy, such as manufacturing and retail. Despite challenges such as higher interest rates and fluctuations in lending activity, the overall picture appears positive as China heads towards the end of the first quarter.
