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- China's economy expanded by a better-than-expected 5.3% in the first three months of 2024.
- But analysts are flagging sluggish home and retail sales as a sign of weak demand.
- The slowdown could hit the bottom line of big US companies such as Apple and Tesla.
Economic data gave Beijing a glimmer of hope on Tuesday — but beneath the veneer of China's quarterly GDP numbers, there are still plenty of reasons for concern.
The world's second-largest economy expanded by 5.3% over the first three months of the year compared with the same period last year, according to the National Bureau of Statistics. That's higher than the 4.8% figure analysts polled by Bloomberg were expecting.
At face value, the better-than-expected GDP number is a sign that policymakers' fiscal and monetary policies are helping revive growth, but analysts warn there are still reasons to worry about China's economy.
Tuesday's data showed March retail sales rose 3.1% from a year ago, missing Bloomberg forecasts of 4.8% growth, while industrial output for last month climbed 4.5% — far below the 6% predicted by analysts.
New home sales meanwhile tumbled 31% over the first quarter, suggesting China's shaky property market is still dragging down growth.
Raymond Yeung, the chief China economist at the Australian bank ANZ, warned that all the signs pointed to the country still having a demand problem.
"I think it is a two-speed economy," he said, according to Reuters. "Domestic demand is still weak, but exports are good."
ANZ expects China's GDP to expand by 4.5% in 2024, well short of Beijing's 5% target.
Apple and Tesla's China struggles
Some of the US's biggest companies are reliant on sales in China — and already feeling the pain from weakening demand there.
Apple is having a tough time in one of its biggest markets, with iPhone sales slumping 33% year on year to 2.4 million in February, according to Bloomberg data. CEO Tim Cook is clearly well aware of the growing threat, having made two visits to China last year, including an unannounced trip in October.
Slumping demand in China has also weighed on Tesla's sales.
The electric-car maker shocked Wall Street by posting dismal quarterly delivery numbers earlier this month. CEO Elon Musk appears to have decided to abandon his price-war strategy in the knowledge that Tesla can't compete with local rivals such as BYD that sell smaller, cheaper electric vehicles.
Boeing, Ford, GM, Nike, and Starbucks are among the other big US companies that count on China as a key source of revenue. Their bottom lines are also likely to suffer if demand there doesn't turn around soon.