Beijing’s target of a 5% GDP growth rate in the first quarter was surpassed by China’s actual growth rate of 5.3%, indicating a robust economic performance on the surface. However, this positive outlook is not shared by households, companies, and even the taxman.
According to the central bank’s urban depositor survey, only 9.5% of respondents saw good job prospects by the end of 2023. Despite this pessimistic outlook, households have been saving more, with an increase of 8.6 trillion yuan ($1.2 trillion) in savings during the first quarter alone. This has led some banks to stop offering long-term fixed-income products to protect their margins.
The downturn in the market is evident in the CSI 2000 Index, which is down 20% for the year, particularly affecting small-cap companies sensitive to business cycles. Additionally, government fiscal revenue decreased by 2.3% from a year ago as of February, suggesting that while China’s GDP growth may be strong on paper, there are underlying issues affecting various sectors of the economy.
Overall, China’s economic performance appears to be strong on paper but there are indications that there are issues lurking beneath the surface that need to be addressed promptly to ensure sustainable economic growth in the future.