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China GDP: Economy shakes off Covid legacy to grow 4.5% in Q1

China’s economy had a strong start in 2023 as consumers increased spending following the end of strict pandemic restrictions. The country’s Gross Domestic Product (GDP) grew by 4.5% in the first quarter compared to the previous year, surpassing economists’ estimates of 4% growth. However, private investment remained stagnant, and youth unemployment reached its second-highest level, indicating caution among private sector employers. Consumer spending rebounded significantly, with retail sales increasing by 10.6% in March and 5.8% in the first quarter. Industrial production also showed steady growth, rising 3.9% in March. China’s economy suffered in 2022 due to the impact of the pandemic on supply chains and consumer spending. However, after abandoning its zero-Covid policy at the end of 2022, the economy has shown signs of recovery, with the services sector benefiting from increased consumer spending. Investment banks and international organizations have upgraded China’s growth forecasts for this year, with the International Monetary Fund predicting a growth rate of 5.2% for 2023. Nevertheless, some analysts believe that the strong first-quarter growth may be the result of delayed economic activity from the previous quarter. Private investment remained weak, with a mere 0.6% increase in fixed asset investment by the private sector. The property industry also faced a downturn, with a decline in investment and sales. Unemployment among young people continued to rise, reaching 19.6% in March. China’s government introduced measures to restore confidence among private entrepreneurs, but concerns about insufficient demand linger. The government aims for cautious growth this year, targeting a GDP of around 5% and the creation of 12 million jobs.