BEIJING, April 17 -- China showed a better-than-expected economic performance in the first quarter of 2024, mainly driven by strong export volume and manufacturing sector capital expenditure, Morgan Stanley Chief China Economist Robin Xing said when commenting on China's latest economic data.
China's gross domestic product (GDP) grew 5.3 percent year on year in Q1, faster than market expectations and higher than the government's annual target of around 5 percent.
Total exports and imports continued to shore up the world's second-largest economy, rising 5 percent year on year in yuan terms in Q1, according to data released earlier this month. The growth rate hit a six-quarter high.
"The Chinese economy grew stronger than the initial market expectations at the end of 2023, particularly on the supply side," Xing said in a recent interview, adding that "it reflected China's supply chain competitiveness."
Many overseas organizations have upgraded their forecasts for China's growth. Goldman Sachs forecast the Chinese economy will expand by 5 percent year on year in 2024, up from 4.8 percent previously. Citi raised its GDP forecast to 5 percent from 4.6 percent.
Morgan Stanley also revised up its 2024 GDP forecast from 4.2 percent to 4.8 percent, and expected China's GDP growth to reach 4.5 percent in 2025, higher than the previous forecast of 4 percent.
"Two-thirds of the upward revision for 2024 GDP growth forecast stems from stronger-than-expected exports, driven by the rebound of external demand and robust export volume amid soft prices," said Xing.
The rest of the upward revision comes from strong capital expenditures in the manufacturing sector, Xing said, highlighting the effects of China's policy efforts on supply chain upgrade, with a focus on energy efficiency and digitalization.
This year, China has doubled down on efforts to promote a new round of large-scale equipment renewals and trade-ins of consumer goods to boost its investment and consumption.
Last week, seven government organs, including the Ministry of Industry and Information Technology and the Ministry of Finance, jointly released a plan on equipment renewals in the industrial sector, aiming to realize a more-than-25-percent increase in equipment investment in the sector by 2027 compared with that of 2023.
China's central bank has also established a special relending facility worth 500 billion yuan (about 70.47 billion U.S. dollars) to support sci-tech innovation, technical transformation and equipment renewal, with one of its key goals set at guiding financial institutions to enhance credit support for equipment renewal projects.
However, the economist also cautioned against the persistent pressure of insufficient domestic demand, weak housing sales, and soft prices amid robust export volume.
Xing said weak domestic demand would weigh on corporate profitability and confidence in business expansion, and ultimately impact companies' willingness to recruit and residents' expectation for wage growth, calling for more supportive policies in stimulating consumption.
Looking forward, Xing expects China's exports to sustain a strong growth momentum in the remainder of the year backed by resilient overseas demand. He also predicted that China's year-on-year GDP growth would reach over 5.5 percent in the second quarter on a low base, making the government's annual GDP target of around 5 percent more achievable.
