Chinese growth smashed forecast for the first quarter, but official data belies wider weakness in the world’s second-largest economy that continues to weigh on markets. Even a recent source of strength is fading, boding ill for shares in
and other widely held Chinese stocks that depend on China’s recovery.
Chinese gross domestic product (GDP) rose 5.3% year over year in the first quarter, according to official figures released Tuesday, far outpacing the 4.5% growth figure expected among economists surveyed by FactSet. The slowdown in China’s economy has rattled markets for more than a year, battering shares in companies like
and
and sending indexes in Shanghai and Hong Kong to multiyear lows.
Such an uptick in growth—ahead of Beijing’s official goal of growing the economy at 5% this year—should be seen as a welcome sign. But markets didn’t see it that way on Tuesday, with the
falling 1.7% and Hong Kong’s
shedding 2.1%.
Shares in Alibaba retreated 1.2% in early U.S. trading Tuesday, with
stock down 1.7%. By comparison, the
index was down 0.2%, having traded higher earlier.
Chinese economic figures aren’t the only factors that investors have to contend with on Tuesday—Wall Street endured a tough selloff on Monday and worries around inflation and geopolitics have lingered. But there is also more beneath the surface of China’s headline GDP growth.
Advertisement – Scroll to Continue
Also released Tuesday were figures covering industrial output, which rose 4.5% in March, lagging estimates of 5.5% growth, as well as retail sales, which advanced just 3.1% last month, behind forecasts of 4.5%. The contraction in real estate also deepened—with property investment falling 9.5% year over year in the first quarter—and a recent source of strength from manufacturing investment slowed down.
“Wider monthly activity data paint a less optimistic picture,” Zichun Huang, an economist at research firm Capital Economics, wrote in a note. After adjusting for seasonality, Capital Economics estimates that Chinese output barely rose on a month over month basis, “calling into question signs from the recent strength of exports, which reached a fresh high in volume terms last month,” Huang wrote.
“Recovery clearly remains fragile,” Huang noted, adding that while short-term fiscal stimulus could continue to support China’s economy, “this is unlikely to prevent a renewed slowdown.” The headwinds seem far from over for Alibaba stock and its peers.
Advertisement – Scroll to Continue
Write to Jack Denton at jack.denton@barrons.com