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(China Economic Roundtable) Economic Watch: Vibrant Q1 consumption mirrors China’s economic stamina


China’s economic outlook remains positive as the country’s consumer spending surged in the first quarter (Q1) of 2024, signaling a strong contribution to domestic demand and overall economic growth.

China’s retail sales of consumer goods, a major indicator of the country’s consumption strength, climbed 4.7 percent year on year in Q1 2024, according to data from the National Bureau of Statistics (NBS).

Analysts believe that the sustained growth in consumer spending is a testament to China’s economic resilience and the effectiveness of policy measures aimed at stimulating domestic demand.

According to a research note by Zhongtai Securities, the per capita disposable income of Chinese residents reached 11,539 yuan (about 1,625 U.S. dollars) in Q1, with per capita consumer spending hitting 7,299 yuan.

The marginal propensity to consume, measured by the ratio of consumption expenditure to disposable income, stood at 63.3 percent, marking a new high since 2020.

Yuekai Securities echoed the optimism, noting that China’s economy has continued to show signs of recovery, underpinned by improvements in supply and demand. The business expectations index within the purchasing managers’ index (PMI) data pointed upwards, reflecting a gradual restoration of confidence among microeconomic entities.

The demand structure revealed that service consumption, high-end manufacturing investment, and infrastructure investment were the main drivers, said Yuekai Securities in a research note.

The total retail sales of consumer goods experienced a monthly growth rate of 0.03 percent, 0.01 percent, and 0.26 percent for January, February, and March, respectively, with a significant acceleration in March, the note said.

« China’s economic recovery is primarily attributed to three factors: the resilience of a large economy, a long industrial chain, and distinct advantages of economies of scale, » said Yuekai Securities.

Service consumption emerged as one of the highlights of the Q1 data.

As Sheng Laiyun, deputy head of the NBS, told a press conference, service consumption contributed 55.7 percent to economic growth in Q1.

The number of trips made during the Spring Festival holiday jumped 34.3 percent year on year, exceeding that of the same period in 2019. Tourism consumption during the holiday also surpassed the level seen in the same period in 2019, official data showed.

Great Wall Securities analyst Jiang Fei noted that in the first quarter, the manufacturing sector showed relative strength in investment, and infrastructure investment demonstrated resilience. On the consumer front, the enthusiasm for travel and tourism among residents has driven consumption in related industries. »

A recent forecast by Trip.com, a prominent online travel agency, anticipates a steady increase in travel enthusiasm during the upcoming Labor Day holiday over last year’s high base levels.

Wang Guanhua, spokesperson for the NBS, emphasized the importance of consumption in stimulating and expanding domestic demand.

« China has an ultra-large consumer market with a population of over 1.4 billion, » Wang said. « The potential for consumption is vast, and its resilience is our greatest strength and source of confidence. »

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