China GDP expands 4.5% year-on-year in 1Q2023, largest increase since 1Q2022

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Link Securities | China’s Gross Domestic Product (GDP) expanded by 4.5% year-on-year in 1Q2023, beating FactSet’s analyst consensus reading of 3.4%, and following a 2.9% rise in the previous quarter. The reading represents its largest increase since 1Q2022, amid the government’s post-pandemic economic recovery momentum, although the growth is somewhat lower than the government’s forecast of 5% growth for the year as a whole.

Meanwhile, China’s industrial production rose by 3.9% year-on-year in March, below analysts’ expectations of 4.4%, but a substantial improvement from the 2.4% rise in the January-February period. The strongest growth came from the solar panels, power generators, automobiles and cement segments. On the other hand, the computer and smartphone segments were the weakest. In addition, capacity utilisation reached 74.3% in 1Q2023, down 1.8 p.p. from 75.7% in 4Q2022 and 1.8 p.p. lower than a year ago.

Retail sales were also the highlight, rising 10.6% year-on-year in March, against the 7.5% improvement expected by the consensus and after 2.4% previously. Restaurants soared, followed by a strong increase in clothing, sports and entertainment, which is consistent with the dynamics of the post-Covid recovery.

Fixed asset investment grew by 5.1% year-on-year cumulatively for the year, compared to a 5.5% increase in the January-February period, while the consensus expected a higher increase of 5.7%. In addition, infrastructure investment rose by 8.8%, while that of the development sector declined by 5.8%, virtually unchanged from the previous contraction of 5.7%, although a notable improvement from the 10.0% drop in the same period last year. At the same time, housing starts remained weak.

Finally, the unemployment rate was another positive piece of news, falling to 5.3%, compared to the analysts’ consensus forecast of 5.5% and the previous month’s rate of 5.6%.

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