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China's Economy Climbs 5% in Q1

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China's economy accelerated in March as its production and demand grew despite the ongoing Middle East conflict.

China's gross domestic product in the first quarter rose 5%, landing within the year's target range of between 4.5% and 5%, according to Thursday data from the National Bureau of Statistics.

The official data beat market estimates of a 4.8% growth, which was also forecasted by analysts surveyed by Reuters. ING economists predicted 4.7% rise, while ANZ analysts foresaw a 4.6% increase.

The NBS attributed the current GDP to an acceleration in the growth of the country's production and supply and improving market demand, as well as a rebound in market prices and stable employment.

In a note, ANZ economists Raymond Yeung, Vicky Xiao Zhou and Zhaopeng Xing saw this as the end of deflation.

"Since the improvement in price is primarily due to cost push rather than demand pull, the risk has now shifted from deflation to stagflation," Yeung, Zhou and Xing said.

The industrial output climbed 5.7% in March, weaker than the 6.3% rise in January and February but beating the 5.5% increase predicted by Reuters surveyed analysts. However, it missed the 5.8% predicted by ANZ.

Meanwhile, retail sales, which increased 1.7% from a year earlier, missed expectations as it was lower than the 2.8% rise in the first two months of the year and the 2.3% increase predicted by Reuters-polled analysts and ANZ's 2.9% forecast.

The unemployment rate averaged 5.3% in the first quarter and it was 5.4% in March.

ING's chief economist for Greater China, Lynn Song, said China can withstand the effects of the ongoing war in Iran unless it is prolonged.

"China is well-placed to weather short-term disruptions, but could face more pressure if energy prices remain higher for longer," Song said. "We could see a greater impact of higher prices on import costs and input costs in the months ahead."

ANZ maintained its full-year GDP outlook of 4.8% due to the strains of the Middle East war.

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