China kicked off the year with a record expansion that even surpassed the glory days of the 1990s, when manufacturing and export stardom beckoned. The first-quarter performance — stellar as the headlines are — masks shortcomings and vulnerabilities that will likely constrain the economy in coming months.
Gross domestic product jumped 18.3% in the first quarter from a year earlier, the National Bureau of Statistics said Friday. That's an impressive performance, albeit one flattered by comparisons with the first three months of 2020, when Covid-19 first hit. Compared with the fourth quarter, growth was less stratospheric — just 0.6%, down from a previously reported 2.6%. Retail sales, considered a soft spot in the recovery, soared by more than a third in March from a year earlier, according to monthly data released simultaneously.
Overall, the figures support projections of a bumper year for the world economy after the disastrous contraction of 2020. The US's powerful rebound backs this optimism, too, with growth projected at 6.4% in 2021, compared with China's 8.4%, according to International Monetary Fund estimates last week. Notwithstanding critiques about widening inequality between the best and the rest, we would all be considerably poorer without fine report cards from Washington and Beijing.
But is China really so far ahead, and is the future as rosy as it seemed decades ago, when it catapulted past one Group of Seven economy after another? Some imperfections suggest a tougher road. A decent chunk of this expansion is attributed to the surge in exports generated by American stimulus. Its own central bank is wary of exuberance and inclined to tap the brakes. With the pandemic now under control and growth looking hale, Beijing can return to one of its main pre-Covid preoccupations: avoiding buildups of risk and excessive debt accumulation borne of loose financial conditions.
To that end, the central bank withdrew funds from the financial system last quarter. Authorities are trying to rein in leverage, while doing just enough to support the economy and ensure liquidity. For all the anxiety about the Federal Reserve scaling back bond buying, the real taper tantrum may emanate from Beijing, as I've written. This stance also suggests monetary officials aren't overly bothered by possible contagion from the recent stress engulfing China Huarong Asset Management Co., one of the nation's largest distressed-debt managers. With the Fed and Congress juicing global growth, China can afford to be prudent. The heavy lifting is being done elsewhere.
America's boom, while it lasts, is great news for exporters — and China is the biggest. Shipments to the US jumped by more than half in March, compared with a year earlier. That bounty isn't restricted to Beijing. South Korean exports rose 16.5% over the same period. Purchasing managers' indexes across Asia, a barometer of manufacturing, are climbing. Barring a setback to the global economy, Singapore's GDP growth is likely to exceed the upper end of the official 4% to 6% forecast range, the city-state's central bank said this week.
The past 20 years have been dominated by a narrative that China drives the world, while the West settles into a funk where GDP moves ahead by 1% or 2% annually. But the US is catching a wave, too. Growth may be 7.7% this year, according to Bloomberg Economics. A number in excess of 7% in America hasn't been seen since 1984. Strong readings Thursday on retail sales — the second-biggest rise since 1992 — and an important factory gauge turning in the best result since 1973 only strengthen a bullish scenario.
Given the cataclysm wrought by the pandemic, it would be churlish not to welcome the vigorous first-quarter numbers from China. Bear in mind, though, Beijing didn't build this recovery all by itself.
Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.
Disclaimer: This article first appeared on bloomberg.com, and is published by special syndication arrangement.