GDP was up 18.3% y/y in Q1, and up 10.3% from Q1 2019, with an annualized growth rate of around 5%. In this report, we mostly use Q1 2019 as the benchmark period, because the major shock from the pandemic in February 2020 makes Q1 2020 data hardly comparable. The adjusted growth rate was lower than in Q4 2020, and higher than in Q3 2020, and can be viewed as stable.

In Q1 2021, industrial output was up 14% y/y from Q1 2019, with annualized growth of 6.8%, slightly lower than in Q4 2020. In particular, industrial growth in March reached 12.8% y/y, with an annualized growth rate of 6.2% y/y, up 0.4 pps from Q3 2020. In Q1, investment rose 25.6% y/y, and increased only 5.4% from Q1 2019, with an annualized growth rate of 2.6%, much lower than in H2 2020.

In Q1, retail sales of social consumption goods rose 33.9% y/y, and were up 8.5% from Q1 2019, with an annualized growth rate of 4.1%, indicating that consumption is still on its way to recovery. In Q1, imports rallied, and grew 19.2% y/y, up 19.3 pps from Q4 2020. Exports increased 16.5% from Q1 2019. The adjusted growth rate is comparable to H2 2020, and is at high levels for recent years.

In Q1, producer prices continue to increase, and the growth rates are high. In March, the ex-factory price index and PPI saw growth reach 4.4% and 5.2% y/y, up 4.8 pps and 5.2 pps from December 2020. This is mainly driven by strong demand for commodities from other countries’ economic recoveries. CPI is instead basically stable. Money and financial indicators grew more slowly. At the end of March, M2 was up 9.4% y/y, down 1.5 pps from its peak last year. M1 was up 7.1% y/y, and has decreased 2.9 pps over four consecutive months.

Postponing the retirement age will be on the Chinese government’s agenda, according to announcement made March 22nd, with further details released on April 13th. China’s aging problem is severe, and population growth is on a steep declining trend, and has attracted great attention. The takeaway from the statement on postponing retirement age is that the delay is to be gradual, and experimental. It will alleviate the negative effects of slower population growth. Population aging and slower growth mainly negatively affect GDP, but not necessarily in per capita terms, due to China’s high savings rate, and financially rich central government.