China: Strong print of Q1 GDP – UOB

Economist at UOB Group Ho Woei Chen, CFA, reviews the latest GDP figures in the Chinese economy.

Key Quotes

“China’s 1Q21 GDP growth was in line with consensus expectation at 18.3% y/y and 0.6% q/q SA (Bloomberg est 18.5% y/y, +1.4% q/q SA), coming from a low base as the GDP had contracted by 6.8% y/y in the same period last year amidst the pandemic.”

“Double-digit growth was recorded across the March economic indicators. Overall in 1Q21, retail sales had recovered at a stronger-than-expected pace while industrial production expansion was below forecast and fixed asset investment was in line with expectation. Survey jobless rate eased lower to 5.3% from previous month’s 5.5%.”

“Retail sales outperformance and recovering jobs market point to momentum picking up in private consumption which should be taking the lead in propelling growth in the later part of the year. The solid growth in 1Q21 and the continuing recovery both in domestic and external demand have placed the economy on track for full-year expansion above our forecast of 8.5%. We now expect China’s 2021 GDP growth at 9.1% (versus our previous forecast of 8.5%).”

“Despite rising debt concern and an expected slowdown in credit expansion this year, we maintain our forecast for both the 1Y LPR and the 5Y & above LPR to be kept unchanged for the rest of 2021 at 3.85% and 4.65% respectively.”