China Q1 GDP Defies COVID-19 Impact But March Data Begins To Reflect Softness: What You Need To Know

China grew at a faster-than-expected clip in the first quarter, belying widespread fears that the COVID-19-induced shutdowns may have hurt the economy.

GDP By Numbers: China's GDP rose 4.8% year-over-year in the first quarter, exceeding the expected growth of 4.4%, data from China's National Bureau of Statistics showed. This also came ahead of the 4% growth posted in the fourth quarter.

On a quarter-over-quarter basis, the growth was 1.3%, slowing from the 1.6% pace in the fourth quarter.

The Chinese government has a GDP growth target of 5.5% for 2022.

The NBS also released a slew of reports, including industrial production, retail sales, fixed-asset investment and unemployment rate. The year-over-year growth in industrial production slowed from 7.5% in February to 5% in March but came ahead of the 4.5% consensus.

On the flip side, retail sales fell 3.5% year-over-year in March, steeper than the 1.6% drop estimated by economists. The unemployment rate came in at 5.8% in March compared to 5.5% in February. This was the highest since May 2020.

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Author's Take — Readthrough For Domestic Companies: The overall GDP growth for the first quarter should bode well for domestic companies. Despite the geopolitical tensions surrounding the Ukraine-Russia war, the domestic economy managed to quicken the pace of growth.

The data for March is beginning to reflect the impact of COVID-19 shutdowns in different parts of China. Domestic electric vehicle companies such as Nio, Inc. (NYSE: NIO) and U.S. giant Tesla, Inc. (NASDAQ: TSLA) were all forced to shutter operations to comply with COVID-19 norms put in place by local authorities.

The repercussions of the renewed COVID-19 outbreak in China will begin to manifest in full force only in the second quarter. Speculations regarding a prolonged shutdown until mid-May are doing rounds and this could have a severe impact on the revenue growth of companies as well as the overall economy.

The softer retail sales portend revenue hit for e-commerce retail giants such as Alibaba Group Holdings, Inc. (NYSE: BABA) and JD.com, Inc. (NYSE: JD). These companies have seen their performances sag due to receding consumer sentiment amid the economic woes and intensifying rivalry from smaller short-video apps that offer live shopping broadcasts by internet celebrities.

A clearer picture can be expected to emerge when these companies report their March quarter numbers in May.

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