September 16, 2022

China’s Economy at a Glance – September 2022

Base effects flatter August’s growth rates, as a fresh COVID-19 wave threatens outlook


  • A fresh wave of COVID-19 is currently impacting China’s economy. At the time of writing, Nikkei report that more than 20% of China’s population are under some form of COVID-19 policy measure – ranging from movement restrictions to complete lockdown. Our earlier forecasts were predicated on stronger growth in the second half of 2022, however given these disruptions and our weaker global economic outlook, we revised our growth profile lower this month – with China’s economy forecast to increase by 3.3% in 2022 (from 3.5% previously) and 5.0% in 2023 (from 5.4%).
  • A number of indicators, most notably retail sales, recorded stronger year-on-year growth in August, however it is important to note that August 2021 was the peak of China’s COVID-19 Delta wave, meaning that base effects from that downturn inflated these rates.
  • China’s industrial production grew slightly more rapidly in August – increasing by 4.2% yoy (up from 3.8% yoy previously), while there was a notable upturn in investment – with real investment rising by 4.2% yoy in August – compared with a 0.5% yoy contraction in July.
  • China’s trade surplus eased somewhat in August – retreating from record highs in July. The surplus totalled US$79.4 billion (compared with US$101.3 billion previously), a level that remains high by historical standards. A month-on-month decline in exports was the key contributor to this trend.
  • A rebound in nominal sales (impacted by the Delta wave base effects) and a dip in retail price inflation saw China’s real retail sales rise by 2.2% yoy (compared with a 0.8% yoy fall in July).
  • In the first eight months of 2022, new credit issuance rose by 10.7% to RMB 24.2 trillion. Despite accounting for the largest share of total credit issuance – at almost 63% over the first eight months – bank lending contracted over this period, down by 0.9% yoy. In contrast, non-bank lending rose by 37.8% yoy over the first eight months. This increase was led by government bond issuance.
  • Despite the PBoC cutting policy rates in August, the effectiveness of monetary easing at present is questionable. Weakness in interbank lending rates points to excess liquidity in the market and limited demand – in line with the deteriorating conditions in the property sector and general weakness in the private-sector economy. Continued monetary policy imbalance has already contributed to capital flight – with data from the Institute of International Finance showing outflows from China in recent months – and further deterioration in the exchange rate.

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