Friday, March 24, 2023

China sends new reassuring signals on its growth

Statistics after statistics, the Chinese economic rebound is confirmed. After the rising PMI indices published in early March, the National Bureau of Statistics (BNS) reported on Wednesday a rebound in retail sales in the country over the January-February period (the data being cumulated for these two months in due to the occurrence of the long Lunar New Year holidays).

Retail sales, the main indicator of household consumption, thus rose, over the first two months of the year, by 3.5% over one year. This is the first time since September that this indicator has been in the green. In the previous publication of retail sales, it showed a decline of 1.8% over one year in December.

Industrial production also accelerated in January-February (+2.4% over one year, against +1.3% in December) while investment in fixed capital increased by 5.5 % over the first two months of the year, at a much faster pace than analysts’ forecasts (4.5%). Which makes the SNB say that “the economy is showing signs of stabilization and recovery”.

Reopening of borders

The resumption of activity has indeed been at work since the lifting of anti-Covid restrictions. The Chinese authorities, who for nearly three years imposed a strict “zero Covid” health policy, finally ended these measures in December, pushed down this path by an unprecedented movement of anger in the country. After a strong rebound in the number of Covid patients in the weeks that followed, things seem to have returned to normal, allowing the economic machine to relaunch and in particular domestic consumption.

Beijing had indicated at the beginning of the month that it was counting particularly on this domestic demand to achieve its growth objectives, due to a degraded international context. Heavily weighed down by “zero Covid”, Beijing only recorded growth of 3% last year. It is aiming for a 5% increase in GDP this year. China’s new premier, Li Qiang, warned earlier this week that his country should redouble its efforts to achieve that goal.

In addition to domestic demand, China is counting on the total reopening of its borders to bring back entrepreneurs and tourists. As of this Wednesday, and after three years of almost total closure, the authorities are once again issuing all types of visas.


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