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April 16, 2021, 4:00 p.m. EDT

China posts record growth on-year in Q1 but recovery seen as slowing

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By Pierre Briançon

The Chinese economy grew by a record 18.3% in the first quarter of the year compared with the same period of 2020, when it had shrunk for the first time in decades due to the COVID-19 pandemic. That was slightly below analysts’ expectations of a 19%-plus rebound. 

  • The economy recovered on the strength of industrial production (+24.5%) as well as retail sales (+34.5%) and household consumption in general, with services lagging. According to the country’s National Bureau of Statistics, output was still 10.3% above its level in the first three months of 2019.

  • The economy expanded by 0.6% in the period when compared with the previous quarter ended in December 2020, a significant slowdown compared with the previous quarter-on-quarter growth of 3.2%.

  • The Chinese government has set an official growth target of 6% for 2021, but most analysts so far see the economy expanding by more than 8%.

  • The NBS saw in the numbers “continued momentum of stable recovery,” but cautioned that the pandemic “is still spreading globally and the international landscape is complicated with high uncertainties and instabilities.”

The outlook: The slowdown could be welcomed by the government, who would not have to worry too much about a possible surge of inflation in the months to come. In which case it could retreat to some neutrality of both fiscal and monetary policies for now.

But if new pandemic waves hit either in China or the rest of the world, threatening the growth target, the government might prefer continued fiscal stimulus to lowering interest rates — which would run counter to its stated policy of helping the economy deleverage.

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