The Chinese economy is slowly starting to improve 2023

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In this batch of activity statistics, retail sales and real estate will be the primary market emphasis. In addition, we prioritize infrastructure investment. This is a “supplementary” growth factor in the event that consumption growth is insufficient. Yet, it is constrained by large levels of local government debt.

Retail sales


After declining by 1.8%YoY in December, retail sales increased by 3.5%YoY in the first two months of 2019. This growth rate is mild, however excluding auto sales, retail sales are up 5.0%YoY YTD (auto sales are down 9.4%YoY YTD). Beginning of this year, electric vehicle incentives were eliminated, which contributed significantly to the decline in automobile sales.

The elimination of Covid limitations led to an increase in catering, which grew 10.2%YoY YTD. Our favored barometer of the typical consumer’s desire for consumption is apparel, which increased by 5.4% year-over-year. This is a positive indicator of recovering consumer sentiment.

Poor exports continue to have an effect on industrial production.


After a year-over-year gain of 1.3% in December, industrial production grew 2.4% in January, which was an improvement but still a bit worse than anticipated. The National Statistical Bureau stated that the month-over-month increase in February was a meager 0.12%, a figure that reflects a decline in exports. The largest export item, electronic components, including semiconductors, decreased by 17%YoY YTD. Microcomputing items decreased by 21.9% YoY YTD, while smartphone sales decreased by 14.1% YoY YTD.

But, if we consider industrial manufacturing for household consumption, the situation is not so terrible. In February, for instance, manufacturing of electronic equipment increased by 13.9%YoY YTD, demonstrating the necessity for equipment upgrades in the wake of Covid. Cement and other real estate-related materials continued to decline in price.

fixed asset investment expansion is consistent

In February, fixed asset investment climbed 5.5%YoY YTD, following growth of 5.1% in December. We emphasize infrastructure investment, which we consider as a “supplementary” growth driver in the event that consumer growth in 2023 falls short of expectations.

The majority of the increase in infrastructure investment came from public utilities, which increased by 11.2%. We consider this to be the local facilities’ post-Covid reorganization. For railway investment, which includes metro investment, this increased by 17.8% year-over-year. This segment of infrastructure investments appears to be gaining speed, and the additional growth engine appears to be giving assistance. Yet increasing local government debt might halt infrastructure spending at any point. Local governments might be required to cherry-pick only vital infrastructure projects to avoid accumulating debt too rapidly.

The decline in real estate investment has slowed to -5.7%YoY YTD, from -10% in December. It is in keeping with our forecasts, with modest numbers of house purchasers taking advantage of cheap property prices and re-entering the market. This provides some optimism in the housing market, but for sentiment to fully recover, all unfinished properties must be completed to a satisfactory level, which remains a problem. Thus, we do not see positive growth in real estate investment until 2024.

Our 5% GDP growth prediction remains unchanged.


Our GDP prediction for China for 2023 remains at 5%. The primary reason is that China faces headwinds, such as exports and local government debt, which might hinder infrastructure investment and the gradual recovery of the real estate industry, despite the fact that consumption should expand moderately.

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