The stronger-than-expected growth in China’s economy in the March quarter hasn’t assuaged concerns over the nature of that growth and its implications for the rest of the world. Indeed, it has exacerbated them.

At face value, the headline number of 5.3 per cent growth in the quarter, relative to the same quarter last year, was surprisingly strong.

If maintained, it would enable China’s economy to comfortably surpass Beijing’s official target for GDP growth of “around 5 per cent”, the latest International Monetary Fund’s forecast of 4.6 per cent growth and last year’s 5.2 per cent.

Chinese President Xi Jinping looks through documents during the opening session of the National People’s Congress.Credit: AP Photo/ Ng Han Guan

The detail in the data released on Tuesday, however, points to a very unbalanced economy, with weak domestic demand and a continuing deterioration in China’s ravaged property sector more than offset by a huge boost from its industrial sector.

Therein lies a problem of Beijing’s own making.

Confronted by the relatively low and slowing levels of consumption within the domestic economy, China’s central planners have orchestrated a big increase in investment in its manufacturing sector, targeting green technologies like solar panels, electric vehicles, wind turbines and legacy semiconductors.

While the country’s manufacturing capacity has increased significantly, utilisation of that capacity has fallen to its lowest level in a decade, at 73.8 per cent in the March quarter. In the car industry, even as China produced 30 per cent more electric vehicles in the quarter than it did last year, utilisation rates were below 65 per cent.

With domestic consumption weak, that excess capacity has been reflected in a strong increase in export volumes, which were up 4 per cent in the quarter. The value of those exports in US dollar terms, however, rose only 1.5 per cent year-on-year – which means the prices of those exported goods were falling.