China starts the year with strength, confirming a prompt recovery of the largest Asian economy, which has set itself ambitious objectives for the current year despite the slowdown caused by the crisis in the real estate sector. A better-than-expected pool of data released today confirms that the People Bank of China (PBOC) will remain cautious in setting monetary policy.
Data well beyond expectations
China’s industrial production, according to the Bureau of Statistics, grew by 7% on an annual basis in February 2024, more than the previous month (+6.8%) and well above the consensus (+5.3%). Growth since the beginning of the year thus stands at 7%, above the previous 4.6%. Business investments also grew more than expected, marking +4.2%, against the expected +3.2% and compared to the +3% of the previous month.
Retail sales, however, were slightly below expectations, recording an increase of 5.5% on an annual basis in February after the +7.4% recorded in January, while market estimates were for growth of 5.6%. . Since the beginning of the year, sales have risen by 5.5%, decelerating compared to +7.2% in the previous period. The unemployment rate rose to 5.3% from 5.1% previously, against expectations for 5.1%.
5% growth target
The Chinese government, despite the crisis in the real estate sector, has set itself very ambitious objectives for 2024, indicating growth of at least 5% after the +5.2% recorded last year.
Asia’s largest economy also plans to create over 12 million jobs in urban areas and to maintain the urban unemployment rate recorded at around 5.5%.
“Prudent” monetary policy
To maintain robust growth, Beijing has decided to maintain a “proactive” fiscal policy and a “prudent” monetary policy. According to the governor of the People’s Bank of China (PBOC), Pan Gongsheng, the central bank “has a rich set of monetary policy tools and still has ample room for maneuver”
“We will pay more attention to finding a balance between the short and long term – he explained – between the pursuit of constant growth and the prevention of risks, and between internal balance and external balance in our regulation of monetary policy” , Pan assured.
Meanwhile, the People Bank of China is preparing to confirm the reference landing rate at 3.45% as expected by analysts, after last Friday the central bank left the one-year reference rate at 2 .5% at the medium-term auction with which it injected 387 billion yuan into the system.
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