China’s economy grew 4.5% in the first quarter, the fastest pace in a year

China’s first-quarter gross domestic product rose sharply while global peers face slowing growth as central banks hike rates to tame inflation.

GDP grew by 4.5% in the first quarter, China’s National Bureau of Statistics said Tuesday. That was higher than the 4% forecast in a Reuters poll of economists and marks the highest growth since the first quarter of last year. Quarter-on-quarter, the economy grew 2.2%.

Retail sales jumped 10.6% in March, exceeding expectations for growth of 7.4% while industrial output rose 3.9%, slightly lower than Reuters’ forecasts of 4%.

Year-to-date fixed asset investment rose 5.1% compared with a year ago, also below estimates for growth of 5.7%.

The economy expanded 2.9% in the fourth quarter of 2022.

China’s growth has been under the spotlight as it reopens after ending most of its strict Covid restrictions that were in place for nearly three years.

The economy grew 3% in 2022, less than Beijing’s official target of around 5.5% set in March last year. For 2023, the government last month set a modest growth target of “around 5%.”

But economists have warned China’s economic recovery could take longer than expected — with the likes of Citi pushing back its target for the Hang Seng index by three months.

While most analysts polled by Reuters don’t expect to see a change in the central bank’s benchmark lending rate, some believe the People’s Bank of China could marginally cut its one-year loan prime rate if China’s inflation slows further.

China’s consumer inflation hit an 18-month low earlier this month.

Ahead of the release, ING’s chief China economist Iris Pang predicted China’s first-quarter GDP would “lag behind” the government’s set growth target for the full year on slowing external factors.

“The slowing growth of external demand … should hurt exports and manufacturing activities,” Pang wrote in a note ahead of the GDP report.

Exports from China unexpectedly rebounded in March, marking a surprise jump of 14.8% after a fall of 6.8% in the previous month. It also saw a trade surplus of $88 billion in U.S. dollar terms, beating expectations for a surplus of $39 billion.

Pang added that services could become a “growth engine” for China’s economy, pointing to the robust activity seen in recent data. The Caixin services purchasing managers’ index rose to 57.8 in March, the highest reading in more than two years.