China’s Strong GDP Growth Masks Uncertainty in Economy: Survey and Indicators Suggest Implmenting Urgent Measures

Despite China’s first-quarter GDP growth of 5.3%, which surpassed expectations and Beijing’s target of around 5%, the economic reality experienced by households, companies, and even the taxman is less optimistic. According to a survey by the central bank, only 9.5% of respondents saw good job prospects by the end of 2023.

In response to uncertainties, households in China have been saving more, with an increase of 8.6 trillion yuan ($1.2 trillion) in savings during the first quarter. Some banks have stopped offering long-term fixed-income products to protect their margins, while 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.

Adding to the economic challenges, government fiscal revenue decreased by 2.3% from a year ago as of February. These indicators suggest that while China’s GDP growth may be strong on the surface, there are underlying issues affecting various sectors of the economy that need to be addressed.