China’s economy experienced a 5.3% growth in the first quarter of the year, surpassing both expectations and Beijing’s target of “around 5%.” However, despite this positive growth, households, companies, and even the taxman are feeling the impact of a less optimistic reality on the ground.
According to the central bank’s urban depositor survey, only 9.5% of respondents saw good job prospects by the end of 2023. As a result, households are preparing for uncertain times by adding 8.6 trillion yuan ($1.2 trillion) to their savings in the first quarter. This trend has led some banks to discontinue long-term fixed-income offerings in order to protect their margins.
The CSI 2000 Index, which consists of small-cap companies that are more sensitive to business cycles, has seen a 20% decline so far this year. Additionally, government fiscal revenue as of February has fallen by 2.3% compared to the previous year.
These indicators demonstrate that while China’s GDP growth may be exceeding expectations, the overall economic landscape is more complex and challenging than what the headline numbers may suggest.