Q1 GDP print beats expectations

China’s economy grew strongly in the first quarter of 2024.

According to data released by the stats bureau (NBS) on Monday:

• Real GDP grew 5.3% in Q1 2024, up from 5.2% in the previous quarter
• On a seasonally adjusted quarter-on-quarter basis, GDP grew by 1.6%, up from 1.2% q/q growth in Q4 2023

High-value industries are growing faster than the rest of the economy.

• The software and IT sectors – broadly covering China’s tech industry – grew by 13.7% y/y, up from 11.2% in the previous quarter.
• High-tech manufacturing grew 7.5% y/y, up from 2.7% y/y in 2023.

Caixin’s new economy index – which approximates the contribution of high-value-added industries to total GDP – averaged 30.2% in Q1, up from 2023’s average of 29.7%.

In nominal terms – which includes price effects – GDP only expanded by 4.2% y/y, the same growth rate as last quarter.

• Nominal GDP growth has remained below real growth for four consecutive quarters, signaling deflationary pressures are deeply embedded in China’s economy.
• You can read about the risks of deflation here.

Get smart: This is a decent GDP print.

• China is on track to hit its growth target of “around 5%,” and policies to support the tech sector and promote industrial upgrading are bearing fruit.

Get smarter: Don't get too cocky.

• Growth momentum slowed in the final month of Q1, weighed down by sluggish consumption and a shrinking property sector.
• If these issues persist, GDP growth later in the year will be less rosy than Monday’s print.