Overview

• According to various media reports, this month’s Central Economic Work Conference determined that China’s 2024 growth target will remain unchanged at “around 5%” (although it will not be officially announced until the National People’s Congress in March). While this target looks likely to be met this year – despite the softness in consumption growth since the brief reopening rebound that following the abandonment of zero-COVID policies in late 2022 – the lack of positive base effects and weaker global demand for its exports in 2024 will make it a more challenging target. Our forecasts are unchanged – we believe growth will slow in 2024 to 4.5% (from 5.2% in 2023) before a modest uptick to 4.8% in 2025.
• Various indicators looked stronger in November, however these upticks reflected base effects associated with the Omicron wave of COVID-19 in November 2022. This included both industrial production (IP) and real fixed asset investment – with IP up by 6.6% yoy – the strongest increase since January-February 2022.
• China’s trade surplus was larger in November – totalling US$68.4 billion (up from US$56.5 billion previously). This reflected a larger uptick in the value of China’s exports than in imports.
• Real retail sales growth accelerated in November – increasing by 10.7% yoy (from 7.8% yoy in October) – however real sales plunged in November 2022. Looking through the pandemic period, we continue to see no clear sign of a lift in consumer spending – real sales in November were 9.8% above those of the same period in 2019, compared with 12.7% in October and 10.8% in September.
• After relatively modest growth in the first seven months of 2023, new credit issuance has accelerated in recent months. In the first eleven months of 2023, new credit issuance rose by 9.5% yoy to RMB 33.6 trillion. This has been driven by rapid growth in government bond issuance in the past four months (up by 193% yoy).
• The People’s Bank of China (PBoC) has resisted cutting its policy rate in recent months, but has continued to add liquidity to financial markets, via increases through the medium term lending facility (MLF) and cuts to the Reserve Requirement Ratio (RRR) of major banks. These supply side measures do little to boost loan demand – which continues to look relatively weak.

For further details, please see China’s economy at a glance (December 2023)