November 15, 2022

China’s Economy at a Glance – November 2022

China refines, not abandons, zero-COVID and remains without an exit strategy


  • In the midst of a third major COVID-19 wave, China’s Politburo Standing Committee have announced some easing in public health policy. While financial markets jumped in response, the policy changes appear relatively modest and lockdowns remains a risk. There also remains no clear forward guidance around further policy relaxation – although the PSC statement notes unfavourable climate during the winter and spring – which may indicate mid-2023 may be the earliest window for significant changes. While our economic forecasts are unchanged this month, the current wave adds some downside risk to our 2022 forecast (3.4%) and potentially some upside (via base effects) to 2023 (currently 5.0%).
  • China’s industrial production growth was slightly slower in October – increasing by 5.0% yoy (compared with 6.3% yoy in September). It is worth noting that growth in both September and October was elevated by base effects – given that the industrial sector was negatively impacted by energy shortages in September 2021 that were not fully resolved in October 2021.
  • China’s fixed asset investment grew a little slower in October – increasing by 5.0% yoy (down from 6.5% yoy previously). However, recent months have seen a considerable slowdown in producer price growth – which flows through to the cost of investment goods. As a result, we estimate that real investment accelerated in October – up by 4.6% yoy (from 3.8% yoy in September).
  • China’s trade surplus barely changed in October – edging up to US$85.2 billion (from US$84.7 billion in September). This modest change came despite steep month-on-month falls in both exports and imports. Some of these declines reflect season patterns, with October typically a weaker month than September due to the Golden Week holidays at the start of the month, however imports fell by 0.7% yoy (compared with a 0.3% yoy increase in September).
  • Nominal retail sales fell by 0.5% yoy in October (compared with a 2.5% yoy increase in September), the first fall recorded since May (in the midst of the major Omicron COVID-19 wave). This decline may reflect the impact of the latest COVID-19 wave impacting a range of industrial cities. Growth in China’s retail prices was a little softer in October, but not enough to offset the fall in nominal sales, meaning that real retail sales fell by 2.7% yoy (from 0.7% yoy in September).
  • In the first ten months of 2022, new credit issuance increased by 8.7% yoy to RMB 28.7 trillion. Bank loans increased modestly over this period – up by 1.0% yoy – with a significant slowing in the growth of outstanding loans to households, which has largely been offset by increased lending to businesses. In contrast, non-bank lending increased by 24.8% yoy – with government bonds a key driver.
  • The People’s Bank of China (PBoC) has held the Medium Term Lending Facility (MTF) rate unchanged since July. Statements from the PBoC have suggested that the central bank is seeking to maintain “conventional monetary policy” for as long as possible, while keeping the currency stable. The growing disparity between Chinese policy rates and those abroad has seen the Yuan depreciate considerably since the start of the year, while data from the Institute of International Finance show substantial portfolio (equity and debt) outflows from China since February. The latter presents risks to China’s financial stability going forward.

For further details, please see China’s economy at a glance (November 2022)