China’s economy is showing early signs of a palpable recovery in the first two months of 2023, providing economists with a hopeful outlook for the full-year growth target. According to data from the National Bureau of Statistics (NBS) released on Wednesday, China’s value-added industrial output rose 2.4 percent year-on-year during this period, up by 1.1 percentage points from December 2022. On the demand side, retail sales of consumer goods, fixed-asset investment, and exports of goods also saw year-on-year growth, expanding by 3.5 percent, 5.5 percent, and 0.9 percent, respectively. Consumption, in particular, was noted as a major bright spot of China’s economic operations.
The 3.5 percent growth in consumption was still lower than the pre-COVID level, but was 5.3 percentage points higher than in December 2022, a significant increase. This figure indicates that merchandise consumption revival is underway, according to Liao Qun, chief economist of the Chongyang Institute for Financial Studies at Renmin University of China.
These positive indicators add to the evidence of China’s incremental economic recovery, including the recent release of central bank data indicating that the country’s new yuan-denominated loans and newly added social financing, indicators reflecting credit supply and demand, both recorded growth above expectations. The purchasing managers’ index for China’s manufacturing sector also increased, suggesting that factory activity had shored up market confidence in a broader economic recovery.
Economists are optimistic about China’s economic outlook, with Wen Bin, chief economist with China Minsheng Bank, anticipating even higher growth due to the sustaining policy effects and improving market confidence. However, potential threats to the economic foundations, such as the mounting pressure faced by the employment market and a yet-to-be-stabilized property market, should not be ignored. Policy-makers have already proposed creating around 12 million new urban jobs in 2023 and ensuring effective risk prevention and mitigation in high-quality and leading real estate enterprises. China will also prioritize expanding domestic demand to anchor its growth on firmer home ground.