China's above expectation Q1 GDP figure passes market relief test

China’s first quarter GDP data release was being billed as the most important economic indicator to be released this quarter and it did not disappoint. According to official figures published on Wednesday (17 April), the country's economy grew slightly faster than expected in the three months to March.

The growth rate – of 6.4% year-on-year in the first quarter – beat a 6.3% market forecast in a Reuters market commentators' poll. It follows a sharp pick-up in factory output, with industrial production rising to 8.5% in March.

The figure is closely monitored for its potential knock-on effect on the global economy. Beijing’s steps to boost its slowing economy, including tax cuts, appear to be bearing fruit, says Sam Buckingham, Investment Analyst at Thomas Miller Investment..

“China has implemented a huge amount of stimulus into the economy more recently to deal with the impact of trade wars and a general synchronised slowdown. We are starting to see the positive signs of this stimulus showing up in some of the country’s soft data series as well.”

Tai Hui, Chief Market Strategist for Asia at JPMorgan Asset Management, said the data indicated Chinese growth had reached its lowest point for the time being. “This momentum is likely to continue going into months ahead with recent surge in credit growth and a possible agreement between the US and China on trade issues,” he wrote in a client note.

However, Tai also said China “would want to avoid another debt fuelled boom after reducing corporate debt to GDP ratio in 2017.”

China’s high frequency economic indicators confirm that growth is bottoming out, according to economists at ANZ. It's a view shared by Capital Economics. 

The country's economic growth has been on a steadily decelerating trend over the past seven years as the world’s second largest economy transitions from a manufacturing-led economy to a services-led one.