China's Q1 Economy Surges 5%, Outpacing Predictions

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China’s Gross Domestic Product (GDP) grew by a stronger-than-expected 5 percent in the first three months of the year compared to the same period last year, despite signs of slowing momentum in March across manufacturing, consumer spending, and investment, according to recent data.

Preliminary estimates indicate that the country’s GDP hit CNY33.4 trillion (about USD4.9 trillion) during the first quarter based on constant prices, marking a 0.5 percentage point increase from the previous quarter. This growth rate surpasses earlier projections from a survey of 16 leading economists, which had forecast a 4.8 percent rise.

The value added by industrial enterprises above a certain size—those with annual revenues of at least CNY20 million (approximately USD2.9 million)—rose 6.1 percent in the first quarter compared to last year, representing a 1.1 percentage point increase from the previous quarter, the National Bureau of Statistics (NBS) reported. Total retail sales of consumer goods increased by 2.4 percent, up 0.7 percentage points, while fixed asset investment grew by 1.7 percent, reversing a 3.8 percent decline experienced throughout all of 2022.

Overall, key economic indicators showed improvement in the first quarter, with emerging drivers of growth expanding rapidly and establishing a positive start to the year, according to Mao Shengyong, deputy director of the NBS. Nonetheless, he cautioned that the international landscape has become more complex and unpredictable, domestic demand remains fragile, and the foundation for sustained economic growth needs reinforcement.

In March, the added value of large-scale industrial enterprises increased 5.7 percent from a year earlier, a slight slowdown of 0.6 percentage points compared to January and February. Meanwhile, total retail sales of consumer goods grew 1.7 percent, a decrease of 1.1 percentage points. Fixed asset investment growth in the first quarter eased slightly by 0.1 percentage points compared to the previous two months.

The first-quarter economy performed well, thanks to policy measures enacted early in the year, the launch of significant projects, and the nine-day Lunar New Year holiday, according to Luo Zhiheng, chief economist at Yuekai Securities. However, he noted that these factors’ effects are likely to diminish in the second quarter, potentially causing a moderate slowdown.

Luo emphasized that a temporary deceleration in growth during the second quarter does not indicate a broader economic downturn but is instead attributable to seasonal factors and external uncertainties.

Cai Wei, director of the KPMG China Economic Research Institute, stated that China’s economy is at a vital juncture—working to consolidate recovery momentum while addressing structural challenges. Looking ahead, with new policies in effect and internal growth drivers strengthening, the economy is poised to maintain stable growth over the long term.