Indicators such as passenger and tourist volumes have seen improvement, although manufacturing sector activity remains sluggish due to tepid demand and export weakness. China’s high level of fixed-asset investment last year, coupled with weakening external demand, will likely result in consumption and real estate rebounding as the main drivers of the country’s economic growth this year. In December 2022, UBS surveyed more than 1,000 Chinese consumers about their travel and spending plans. While travel intentions increased, the majority of respondents maintained a cautious attitude toward consumption during the Spring Festival holiday. However, willingness to consume throughout the year has increased significantly due to consumers’ recovering expectations regarding personal incomes this year.
There is no severe rebound witnessed in COVID-19 infections, leading to a stronger recovery in consumer confidence nationwide. The optimization of COVID-19 containment measures will drive many offline consumption scenarios, supporting a stable recovery in consumption. The excess savings accumulated in the past three years will be released depending on the speed with which confidence and the economy recover, but there is no sign of large-scale distribution of subsidies for low- and middle-income consumers this year.
Regarding real estate, there have been many adjustments in the industry due to tightening policies in previous years, dried-up real estate demand, and the unexpected shock of the COVID-19 pandemic. Regulators have noticed what is happening in the real estate industry and are ramping up efforts to ensure the industry is on a steady track. Property sales have rebounded in some cities, and willingness by potential homebuyers has also improved. Based on market confidence and government stimulus measures, actual consumption growth this year is expected to reach about 6.7 percent, with a GDP growth of some 5 percent. There could be more done to hasten the recovery, but this depends on how long the momentum will last, the extent of the recovery of employment and household incomes, and the strength of subsidies to support household incomes and consumption.
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