Apr 17, 2024 - Economy

China's less-than-meets-the-eye GDP report

Illustration of magnifying glass over star

Illustration: Eniola Odetunde/Axios

China's GDP rose by 5.3% in the first quarter, compared to a year ago.

The big picture: That's a lot faster than the 3.1% Q1 growth that economists expect to see in the U.S. But the difference between the two might be smaller than it looks at first sight.

Between the lines: By convention, GDP is reported in real terms, meaning it's adjusted for inflation. If you look at nominal GDP, however, the Q1 growth rate turns out to be 4.2% for China — significantly lower than the estimated U.S. figure of 5.4%.

Why it matters: Endemic Chinese deflation — the GDP deflator, the broadest measure of inflation, has now been negative for five of the past six quarters — is a signal of broad-based economic weakness not only in China but in the emerging world more broadly.

  • "Dimmer prospects for growth in China," according to the IMF's World Economic Outlook, published Tuesday, "will weigh on the prospects of trading partners."

Zoom in: Chinese growth, such as it was, already seems to be fading: Most of the Q1 surge took place in January and February, while March saw both retail sales and industrial production disappoint.

  • Any hope for continued growth above 5% relies overwhelmingly on public spending — and that, paradoxically, might not be forthcoming if the country's leadership is happy with the reported Q1 growth rate.

The bottom line: Real estate slumps take a long time to recover from, as the U.S. learned after 2008 and as China is beginning to realize now.

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