The distribution of first quarter growth is worrying, but not surprising

CHINA FINANCIAL - Report 18 Apr 2022 by Michael Pettis

Special points to highlight in this issue:

* The National Bureau of Statistics reported this morning that China’s first quarter GDP was 4.8 percent higher than it was last year and 1.3 percent higher than the last quarter of 2021 (5.3 percent annualized).

* While this was well above very low consensus expectations, it should not have surprised us, as we see from a decomposition of the sources of growth. Household disposable income grew more slowly than GDP, and consumption grew much more slowly. The engines of growth, as they have been for much of the recent past, were exports and fixed asset investment.

* The real concern about first quarter growth, in other words, is not how low it was but rather how badly distributed it has been. This doesn’t bode well for the composition of growth over the rest of this year, but it does reinforce my expectation that, unless we see a major COVID outbreak in the second half of this year, China will still be able to meet 2022’s 5.5 percent GDP growth target.

Now read on...

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