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Data Flash is a brief interpretive summary of China’s official monthly economic data release.
The growth recovery in Q1 is likely real, yet it is also likely unsustainable. Both exports and infrastructure investment increased more than expected. Strong growth in real estate investment also fueled Q1 growth, but it was in line with expectations. Among these three drivers, growth in real estate investment and in infrastructure will likely moderate in the second half of the year. The sustainability of external demand, given all the geopolitical uncertainty now in play, is anything but certain. However, there are some positive signs in Q1 that point to improving fundamentals, including a modest recovery in private investment in manufacturing, an uptick in real income growth, and some evidence of consumption upgrading. However, the determinant factor for growth in the near term will be the dual impacts of fading policy support and the diminishing real estate boom.