Economy Watch: China View (March 2023)
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Economy Watch | China

Monthly updates on the state of the economy in China

Economy Watch: China View (March 2023)

April 05, 2023 | Report

Insights for What’s Ahead:

  • Status of China’s Economic Recovery – China’s economic growth is rebounding, with Jan-Feb data showing an improvement in both supply- and demand-side indicators. The official growth target for 2023 was set at “around 5 percent.” Although this target has been referred to as “modest,” we believe it is realistic, and is in line with our own 2023 GDP forecast of 5.1 percent.
  • Investment Trends – Investment into manufacturing and infrastructure saw relatively robust growth; and while real estate investment continued declining, the decline narrowed notably from December. Going forward, we expect infrastructure investment to continue growing at a faster pace than overall Fixed Asset Investment (FAI). 
  • Consumption Trends – After contracting for three consecutive months, Jan-Feb retail sales growth moved into positive territory. China’s exit from zero-COVID is the key facilitator of this rebound. Meanwhile, headline CPI slowed down to 1 percent in February, largely due to seasonal declines, but we expect it to rise moderately in 2023 as consumption activities pick up.
  • Trade Trends – Exports contracted -6.8 percent y-o-y in Jan-Feb, but the decline softened compared with December. Exports to the US saw the most significant decline, while exports to ASEAN remained resilient thanks to the region’s post-COVID economic rebound. Nonetheless, given the worsening global economy, a substantial decline in exports this year is unavoidable.
  • Implications for Business – 2023 will be a challenging year for growth. While the Chinese economy is indeed rebounding, it still faces several headwinds. Domestic consumption remains below pre-COVID levels, and confidence is recovering at a slow pace. The property sector is bottoming from its protracted downturn, but its outlook remains uncertain. Local government finances are in a precarious situation. External demand is dropping due to the global growth slowdown. To make matters worse, the geopolitical environment continues deteriorating.

AUTHORS

Amy Huang

Former Economist, China Center for Economics and Business
The Conference Board

AlfredoMontufar-Helu

Head of the China Center
The Conference Board

AnkeSchrader

Former Research Director, Asia
The Conference Board


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