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.

Related Link: Why Alibaba And Other Stocks Are Not Trading In Hong Kong Today

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. NIO and U.S. giant Tesla, Inc. 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. BABA and JD.com, Inc. 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.

Related Link: Analyst Details Tesla's Giga Shanghai Reopening Plans: Here's How It Works