Foreign direct investment in the Chinese mainland, in terms of actual use, rose 4.9% year-on-year to CNY408.45 billion in the first quarter. More than 10,000 foreign-funded companies were established in China between January and March, representing a year-on-year growth of 25.5%. The better-than-expected first-quarter GDP growth of 4.5% indicated that the rebound of the economy is accelerating. Retail sales, a major driver of economic growth in China, surged 10.6% year-on-year in March, beating expectations and hitting a near two-year high.
FDI in the high-tech industry surged 18% to CNY156.71 billion. First-quarter FDI from France surged by 635.5%, and there was a 60.8% increase from Germany. Investment from the UK increased by 680.3% year-on-year, Canada's increased by 179.7% and Japan's by 47.4%. The number of new foreign investment-backed enterprises in China surpassed 10,000 in the first quarter, up 25.5% year-on-year. So far this year, more than 300 contracts have been signed for foreign investment-backed programs in China covering biomedicine, advanced manufacturing, chemical engineering, energy, and modern services. The high level of FDI reflects the trend of importing advanced technologies, management experience and new industries.
The retail figure showed the release of huge consumption potential after the optimization of the Covid-19 response and provided strong impetus to the economic recovery in the first quarter. The pull of consumption on full-year economic growth will gradually increase, experts and officials said. Yang Jinghao, Chief Economist at Concat Data Technology (Hangzhou), said car consumption contributed to over 3 percentage points of the retail sales growth in March, playing a key role in driving the overall recovery of consumption. China’s auto retail sales rose 11.5% year-on-year in March, up from a 9.4% decline in the January-February period.
The rebound in GDP growth was mainly boosted by much faster growth in the tertiary sector (mainly services), thanks to the end of the epidemic in mid-January, Nomura economists said in a report. Iris Pang, Chief China Economist at Dutch bank ING, said there is no immediate need for the government to put massive stimulus into the economy, but it will probably keep its plan for infrastructure investment as a supplementary growth engine as her team expects the external market to deteriorate further this year.
In March, retail sales reached CNY3.79 trillion, driving first-quarter consumption up 5.8% year-on-year, compared with a 2.7% drop in the fourth quarter last year, according to the National Bureau of Statistics (NBS). The momentum of the consumption recovery accelerated in March compared with the January-February period, which mirrored a faster-than-expected rebound in personal incomes, led by an uptick in operating incomes, Tian Yun, Economist based in Beijing, told the Global Times. Fu Linghui, Spokesperson of the NBS, told a press conference that in the first quarter, the contribution of consumption to GDP growth reached 66.6%, a significant rebound over the whole of last year, becoming the major engine of economic growth.
With the impact of the epidemic receding and consumer sentiment improving, contact-related consumption, including dining, entertainment and travel grew rapidly, with first-quarter catering revenue up 13.9% year-on-year. “The recovery of the catering industry is an important indicator of the rebound of social activity, and it is a result of the joint efforts of central and local governments to promote consumption,” Li Yong, Deputy Chairman of the Expert Committee of the China Association of International Trade, told the Global Times. The NBS added that 26 out of 41 major industries maintained year-on-year growth after the country abandoned its zero-Covid policies late last year.
In the first quarter, sales of consumer goods rose 4.9%, compared with a 1.7% fall in the fourth quarter of 2022. Retail sales of basic necessities such as food increased by 7.5%, while those of discretionary goods like cosmetics rose 5.9%. In the near term, consumption as a driver of GDP growth will remain dominant. “From a medium- to long-term development perspective, China's per capita GDP has reached USD10,000 and is still rising, and the long-term consumption outlook is promising,” according to the NBS Spokesperson. The country’s value-added industrial output grew by 3% year-on-year in the first quarter, while fixed-asset investment rose by 5.1% year-on-year.
China’s solar battery output in the first quarter surged by 53.2% year-on-year, compared with the 24.3% year-on-year growth in the same period in 2022. Experts said the big growth will have a positive influence on the supply chain as it will ease the pressure of demand for solar batteries from downstream photovoltaic facility manufacturers who are keen to ramp up their production. Installed capacity of solar power totaled 413 million kilowatts by the end of February, up 30.8% year-on-year, according to the National Energy Administration (NEA). The NEA said that while the first two months saw 20 million kW of additional installed capacity, more efforts are in the pipeline to develop wind and solar power, targeting installed capacity of about 160 million kW this year. In the past year, newly added wind and PV installed capacity reached 125 million kW, a historic high, of which newly increased solar power capacity was 87.41 million kW.
There were 316 Chinese unicorn companies, or startups valued at over USD1 billion, by the end of last year, 15 more than the previous year, according to the Global Unicorn Index 2023 by research institute Hurun. The United States continues to lead the world with 666 unicorn companies at the end of 2022, followed by China in second place. There are 379 unicorn companies in the rest of the world, the report added. Unicorn companies in China mainly focus on artificial intelligence, semiconductors and e-commerce. Among all the Chinese mainland cities, Guangzhou recorded the fastest growth of unicorn companies in the last year. It now has 22 unicorns, a year-on-year increase of 12, and nearly threefold the number recorded three years ago.
This overview is based on reports by the China Daily, Global Times and South China Morning Post.
