China Joins U.S. as Engine of Global Recovery With Record Growth

China’s economy strengthened in the first quarter of this year as consumer spending rose more than expected, putting it on course to join the US as twin engines for a global recovery in 2021. GDP rose 18.3% in the first quarter from a year earlier, largely in line with the 18.5% marking the highest increase since China began to publish quarterly data in 1992. Though that record-breaking figure was mainly due to comparisons with a year ago when much of the economy was shut due to coronavirus. Retail sales beat expectations while industrial output growth moderated.

The recovery last year was led by strong investment in real estate and infrastructure spurring demand for industrial goods, while overseas orders for medical goods and electronic devices fuelled exports. The economy was also boosted by a jump in investment from overseas. Markets were choppy following the data release but ended the day little changed, with the benchmark CSI 300 Index paring an earlier loss of as much as 0.6% to finish up 0.35% for the day. The yield on benchmark 10-year sovereign debt fell slightly to 3.16%. The onshore yuan was unchanged on the day at 6.5226 per dollar.

Data released Thursday showed the US economy’s comeback, with retail sales exceeding pre-pandemic levels in all categories except restaurants. Production at US factories increased in March by the most in eight months. China has rapidly accelerated its vaccination campaign over the past month in a move that should help bolster spending on services. A recovery in major economies fuelled by vaccine roll-outs and the Biden administration’s massive fiscal stimulus is expected to sustain rapid growth in Chinese exports this year. Economists have upgraded their forecasts for China’s growth in recent days, Bloomberg Economics expects 9.3% expansion, ING Groep NV economist Iris Pang predicts 8.6% and Nomura sees 8.9%.

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