China’s Strong GDP Growth Hides Bleak Economic Outlook for Households, Companies and the Taxman

China’s first-quarter GDP growth of 5.3% surpassed expectations and the government’s target of around 5%, indicating a strong economy on the surface. However, a closer look at the economic situation reveals a less optimistic picture for households, companies, and even the taxman.

According to a survey by the central bank, only 9.5% of respondents saw positive job prospects by the end of 2023. In response to uncertainties, households have been saving more, resulting in an increase of 8.6 trillion yuan ($1.2 trillion) in savings during the first quarter. This has led some banks to stop offering long-term fixed-income products to protect their margins.

The downturn in the market is evident in the CSI 2000 Index, which has fallen by 20% for the year, particularly affecting small-cap companies sensitive to business cycles. Additionally, government fiscal revenue decreased by 2.3% from a year ago as of February. These indicators suggest that while China’s GDP growth may be strong on paper, there are underlying issues affecting various sectors of the economy that need to be addressed urgently.