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China’s first quarter GDP growth came in slightly higher than expected, putting the economy on track to meet the government’s annual growth target, but signs of weakness are evident too, says Desjardins Group.

Real GDP growth for China’s economy reached 1.6% in the first quarter of 2024, up from 1.2% in the previous quarter and ahead of the consensus forecast of 1.5% growth in the first quarter, the firm reported.

“This is a step towards the Chinese government’s official annual growth target of 5.0%,” Desjardins said in a research note released Tuesday.

However, the firm also noted signs of emerging weakness in China’s economy, including softer than expected readings for industrial production, retail sales and investment.

“While it’s still a little early to see the overall trend, an economic slowdown in March could dampen real GDP growth in the second quarter,” Desjardins said.

The risks to the Chinese economy “are still to the downside,” the report said. “The crisis in the property sector continues to be a major drag on activity, and its impact can be felt across several sectors.”

So far, government efforts to ease stress in the property sector and to prop up business and consumer confidence haven’t succeeded, the report¬†said.

“China’s better-than-expected real GDP growth pushed our 2024 forecast to 5.0%, which matches Beijing’s target. That said, today’s print was also a reminder that the Chinese economy is still being held back by a number of challenges, such as the property crisis and weak domestic demand,” Desjardins said.