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China's economy performed better than expected — signalling a recovery

Lianna Brinded
Head of Yahoo Finance UK
The Forbidden City was the Chinese imperial palace from the Ming Dynasty to the end of the Qing Dynasty. Photo: Frédéric Soltan/Corbis via Getty Images

China’s economy grew faster than expected in the three months to March, reassuring investors that Beijing’s stimulus measures are taking hold.

Official figures showed that the world’s second largest economy expanded at 6.4% in the first quarter from a year earlier — beating a Reuters forecast of 6.3%. Industrial output surged 8.5% year-on-year in March and retail sales also jumped by 8.7% year-on-year.

Asian markets — Japan’s Nikkei, Hong Kong’s Hang Seng, and China’s Shanghai Composite — all moved into positive territory, following the data release, but were only up around 0.3%.

China’s economy has been a concern to investors around the world because “economic growth has been on a steadily decelerating trend over the past seven years as the world’s second largest economy transitions from a manufacturing-led economy to a services-led one,” said Sam Buckingham, investment analyst at Thomas Miller Investment in a statement to Yahoo Finance UK.

Back in January, China’s economy grew at its slowest rate since 1990, sending investors and markets in a tailspin due to fears of what the impact would be on the rest of the world. Earlier this year, China’s deputy leader Li Keqiang  warned the country faces “a tough struggle.”

Beijing has had a tricky time in trying to take steps to boost the economy by implementing a range of stimulus measures while also trying not to stoke debt inflation.

Last month, at the opening of the annual session of China’s parliament, the government forecasted slower growth of 6% – 6.5% for 2019. This is down from a 6.5% target in 2018. At the same event, Li said that China would aim to deliver nearly 2 trillion yuan (£227bn, $298bn) of cuts in taxes and other company fees to help boost the economy.