China’s economy grew strongly in the first three months of the year, new data shows, as China built more factories and exported huge quantities of goods to counter a severe housing crisis and low domestic spending.
To spur growth, China, the world’s second-largest economy, has resorted to a familiar tactic: investing heavily in its manufacturing sector, including a series of new factories that have helped propel the worldwide sale of solar panels, electric cars and others. some products.
But China’s bet on exports worries many foreign countries and companies, which fear that increased shipments of Chinese goods, which are flooding economies elsewhere, will hurt their own manufacturing industries and lead to layoffs.
On Tuesday, China’s National Bureau of Statistics said the economy grew 1.6 percent in the first quarter compared with the previous three months. When projected for the full year, first-quarter data indicates that China’s economy grew annually by about 6.6 percent.
China needs robust growth to reduce youth unemployment, which remains high, and to help businesses and households cope with very high debt levels.
For the year, China set a growth target of around 5%, a goal that many economists considered ambitious, although some have recently revised their forecasts upwards. Last year, China’s economy grew by 5.2 percent.
Output was 5.3 percent higher in the first three months of this year than in the same period last year, the statistics office said on Tuesday. This exceeds economists’ forecasts of an increase of 4.6 to 4.8 percent.
Strong exports at the start of the year helped revive the Chinese economy. The value of exports rose 7 percent in dollar terms in January and February from a year earlier, and 10 percent when measured in China’s currency, the renminbi. But the real contribution of exports to the country’s economy has been considerably greater, with falling prices masking the full extent of China’s export gains.
Guo Tingting, vice minister of Commerce, said at a press conference last month that the physical volume of exports increased by 20 percent in January and February compared with last year. However, exports fell somewhat in March.
Retail sales have also increased this year, but at a moderate pace of 4.7 percent compared to the first three months of last year. With street festivals and other activities, the government has encouraged families to spend more, even as many Chinese have increased their savings to compensate for the recent fall in the value of their apartments.
Domestic tourism spending and box office ticket sales both increased during the Lunar New Year in February, easily surpassing pre-Covid-19 pandemic levels. Smartphone sales have also increased – but not for Apple – as Chinese buyers increasingly choose local brands.
The widespread fall in prices, a phenomenon which can turn into deflation, continues to pose a problem, particularly for exports and at the wholesale level. Chinese companies are struggling to reduce export prices and capture a greater share of global markets, even if it means suffering heavy losses.
In high-level meetings earlier this month with Chinese officials, Treasury Secretary Janet L. Yellen warned that flooding markets with exports would disrupt supply chains and threaten industries and jobs. German Chancellor Olaf Scholz expressed similar concerns during a visit to China, while warning against protectionism in Europe.
China is ramping up its manufacturing sector and exports to offset a deep decline in housing construction and apartment prices. Housing construction – and the production of steel, glass and other materials for housing – has been the main engine of growth in China for many years. But sales of new apartments have declined fairly steadily since the start of 2022. Few construction projects are getting underway now, while dozens of insolvent or near-insolvent developers struggle to complete the homes they previously promised to buyers.
Chinese officials blame China’s economic weaknesses in part on high overseas interest rates put in place by the Federal Reserve to combat inflation in the United States. These rates have made it more attractive for Chinese families and businesses to transfer money out of China, where interest rates are low, to foreign countries where rates are higher.
“The negative impact of the high interest rate environment on the economy continues,” said Liu Haoling, chairman of the China Investment Corporation, China’s sovereign wealth fund. He spoke in late March at the China Development Forum, a meeting in Beijing of policymakers and leaders.
China’s manufacturing juggernaut, buoyed by years of policy directives and financial support from Beijing to local governments and businesses, has made the country’s products some of the cheapest in the world. The U.S. government revealed last week that average prices for imports from China were down 2.6% in March from a year earlier.
China has asked companies to invest more in research and development, hoping a wave of innovation would boost economic development.
The country is also demanding that factories pursue greater automation. “By 2025, we will have achieved a new type of industrialization,” Jin Zhuanglong, Minister of Industry and Information Technology, said at the China Development Forum, stressing that China produces already more than 30% of the world’s manufactured goods.
China’s state-controlled banking system has channeled more money to industrial companies, helping them finance large-scale construction of new factories. Investment in manufacturing projects jumped 9.4% in the first two months of this year compared to the previous year.
But many households are reducing their spending. “Chinese companies, across a wide range of sectors, are now producing far more than domestic consumption can absorb,” the Rhodium Group, a consultancy, said in a report in late March.
People’s distrust of spending is a phenomenon Li Zhenya sees every day. He runs Izakaya Jiuben, a Japanese restaurant in Beijing’s Wangjing district, which was once home to some of China’s biggest tech companies.
A few years ago, workers lined up outside the restaurant, streaming out of nearby offices to spend their hard-earned money on short breaks between long work days. These days, many restaurant seats are empty at lunch and dinner.
“People’s desire to consume is not so high today,” said Mr. Li of Jiuben. The restaurant, he said, generates about $2,156 in revenue a day, about half its sales just a few years ago.
“I’m losing money running the restaurant,” he said.
Jiuben is on the fourth floor of Pano City Mall, where restaurants advertising Korean, Japanese and Chinese dishes operate next to empty storefronts. Some places seem abandoned: the lights are off but a pile of takeaway boxes sits near the cash register, the lamps are still hanging or the chairs and tables are intact.
Centered around three curved, pebble-shaped buildings designed by Zaha Hadid, the Wangjing district was once a hub of activity for the capital’s busiest workers. Restaurants and stores have benefited from the presence of companies like Alibaba, JD.com and Meituan.
“Before, the lights were turned on when darkness fell, but now at least half of the lights are turned off,” Mr. Li said.
A government crackdown starting in 2020 caused companies to cut jobs. Others left Wangjing. Covid-19 restrictions that froze the neighborhood for weeks have made it difficult for Wangjing’s small businesses to resume.
“The outbreak has led to cautious consumption,” said Kou Yueyuan, the owner of Smoon Bakery, down the street in Pano Town. “Customers are obviously very price sensitive,” Ms. Kou said.
Ms. Kou started her business more than eight years ago, selling baked goods like bitter melon bagels and ube mochi twists. Now, it places less emphasis on developing new baked goods with different flavors. Instead, she works to keep costs low so the bakery can offer cheaper prices.
Read you contributed to the research.
News Source : www.nytimes.com
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