In recent developments, China has released its quarterly and monthly economic data, as well as President Xi Jinping’s meeting with German Chancellor Olaf Scholz in Beijing. While China’s GDP increased by 5.3% in the first quarter, surpassing estimates, growth in retail sales and industrial production for March fell short of expectations. This indicates a mixed outlook for the economy and raises concerns about the potential strong start to 2024 fading.
The real estate crisis continues to pose challenges, with home price declines narrowing in March but affecting other industries. Cement output plummeted by 22% in March, marking the largest monthly decline on record. Economists believe policymakers need to provide more support and avoid complacency. The positive GDP number could lead authorities to believe that further policy easing is unnecessary.
The economic data has contributed to negative sentiment affecting Asian stocks and emerging market currencies. The yuan weakened following a market fixing that was below expectations, and Chinese stocks experienced a significant drop. Small cap stocks were particularly impacted due to plans for stricter regulations.
During his meeting in Beijing, Scholz discussed trade, the war in Ukraine, and climate issues with Xi. The German Chancellor emphasized the importance of addressing overcapacity and improving treatment of foreign firms. This meeting highlights the complexities of the economic relationship between China and Germany, as China remains Germany’s main trading partner.
