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China’s Economic Activity Picks Up Pace in January-February 2023

BusinessChina's Economic Activity Picks Up Pace in January-February 2023

China’s economy is showing signs of stabilization and acceleration, with the National Bureau of Statistics reporting a marked improvement in key economic data for the first two months of 2023. The country’s retail sales, a crucial measurement of consumer spending, surged 3.5 percent year-on-year during the January-February period, indicating a bounce back after a 1.8 percent decline in December. Meanwhile, fixed-asset investment, a gauge of spending on infrastructure, property, machinery, and equipment, rose by 5.5 percent during the same period, compared to a 5.1 percent rise for the entirety of 2022.

According to Louise Loo, China lead economist at British think tank Oxford Economics, the uptrend in China’s economic activity was broad-based during January and February, with retail sales and investments more or less in line with expectations. Loo cited official data, stating that factory output also accelerated after decelerating for three months, in line with the improving purchasing managers index data and reports of supply chain bottlenecks easing.

While more modest industrial production reflects weaknesses in external demand, China’s industrial output, a gauge of activity in the country’s manufacturing, mining, and utilities sectors, grew by 2.4 percent in the January-February period, slightly lower than the 2.6 percent anticipated by a Reuters poll.

Nomura’s chief China economist, Lu Ting, said the activity data for January and February shows improvement across the board compared to the fourth quarter of 2022. However, the recovery pace has not been very strong due to shrinking exports and a still-weak property sector. Lu predicts that these major activity data will improve further in March, with the State Council likely to maintain a supportive yet restrained policy stance in the coming months.

China has set an economic growth target of around 5 percent for 2023, which officials and analysts believe is pragmatic and achievable. The nation’s economy expanded by 3 percent year-on-year in 2022. According to NBS spokesman Fu Linghui, China’s potential growth rate is widely projected to stay between 5 percent and 7 percent, and the country has the conditions, foundation, and confidence to achieve the target this year despite challenges.

Executives from global companies have expressed strong confidence and optimism for a robust 2023. Zhang Xiqiang, CEO for China at Nestle SA, said the company is now “even more confident of and committed to the Chinese market and the country’s economy” due to the optimization of COVID-19 response measures and the determination for wider opening-up. Xu Yang, president for China at Danish engineering company Danfoss Group, spoke highly of China’s opening-up measures and focus on the protection of intellectual property rights, saying that these have strengthened their long-term confidence in the Chinese market. Danfoss has committed to long-term investment in China, with plans to invest 100 million euros ($105.8 million) to build a model plant in Nanjing, Jiangsu province.

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