China's Economy Surges 5% in Q1, Exceeding Expectations

China’s economy grew 5% in the first quarter of 2024 from a year earlier, beating economists’ expectations of 4.8%. The result came as global conditions were described as disrupted, including effects linked to the U.S.-Israel conflict with Iran that began on February 28 and affected energy supplies, particularly across Asia.

The first-quarter GDP reading also matched Beijing’s recently adjusted annual growth target range of 4.5%–5%, described as the lowest since 1991. Officials have set out policy priorities through the latest Five-Year Plan announced in March, which includes goals to increase investment in innovation and high-tech industries and to roll out measures aimed at lifting domestic spending.

Manufacturing was identified as the main driver of the quarter’s expansion. At the same time, falling property investment continued to weigh on activity, keeping pressure on growth even as other parts of the economy improved. The policy agenda described in the Five-Year Plan is intended to respond to several challenges cited by the government, including weak consumption, a shrinking population, and a prolonged property crisis.

External pressures were also highlighted. China is facing higher energy costs tied to the Middle East conflict, alongside ongoing trade frictions that include U.S. tariffs. These factors have been cited as part of the backdrop for trade and industrial conditions as the year progresses.

Trade data for March showed exports rising 2.5% year-on-year, a six-month low, after a combined 20% increase in January and February. Imports jumped by nearly 28% in March, leaving a trade surplus of just over $50 billion, the smallest in more than a year. The increase in import values was attributed to higher global costs, especially for crude oil and related materials, with shipping routes affected by the conflict.

What remains uncertain is how long the energy and shipping disruptions linked to the conflict will persist, and how strongly they will continue to influence costs for Asian buyers and global supply chains. Separately, the extent to which domestic measures can offset the drag from declining property investment and weak consumption is not specified in the available figures.