Economists at Standard Chartered offer their afterthoughts on China’s quarterly growth numbers released on Tuesday.

Key quotes

“China’s economy grew 5.3% y/y or 6.6% annualized in Q1, beating market consensus by a wide margin.”

“Output gap narrowed to -1.6% of GDP in Q1 from -2.2% in Q4; GDP deflator stayed negative at -1.1% y/y.”

“We think it is still too early to sound the all-clear on China’s economy as it continues to battle a sluggish domestic housing market, weak consumer confidence and disinflationary pressure.“

“Further monetary easing is likely still needed in H2, especially if the US Fed starts cutting rates (which would ease CNY depreciation pressure vs the USD). We continue to forecast a 10bps cut in the medium-term lending (MLF) rate in both Q3 and Q4, and a 25bps reserve requirement ratio (RRR) cut in Q3.”

“Our 2024 GDP growth forecast remains intact at 4.8%, slightly higher than consensus 4.7%. We see upside risks to our forecast from effective implementation of the government’s “action plan for large-scale equipment renewal and consumer goods trade-in”, and strengthening external demand.”