China’s Economy Surges Past Expectations, But Structural Challenges Persist Despite Ongoing Struggles with COVID-19

Despite facing challenges such as a property-sector crisis, weak consumer demand, and increasing government debt, China’s economy has had a strong start to the year under the leadership of President Xi Jinping. The National Bureau of Statistics (NBS) reported that the economy grew by 5.3 percent in the first quarter, surpassing expectations.

According to NBS data, industrial production and agriculture grew by 6.1 percent and 3.8 percent, respectively, while services saw a 5 percent growth. The agency stated that the economy’s positive performance was attributed to the effective policies implemented under the guidance of the Central Committee of the Communist Party of China.

However, recent data on exports and imports showed a decline in March, highlighting ongoing challenges faced by China’s economy. Structural issues such as a highly indebted real estate sector and a shrinking population have also been hindering sustained recovery from the COVID-19 pandemic.

Fitch Ratings recently downgraded China’s sovereign credit outlook to negative due to increasing risks to its public finance outlook. Despite setting a growth target of 5 percent for 2024, Chinese officials have implemented fiscal and monetary policy measures, including substantial spending on construction and infrastructure projects to stimulate economic growth.