Chinese Economy Sees Modest Rebound in Early 2021, But Challenges Remain

China’s economic activity rebounded modestly in the first two months of the year, data released Wednesday by the National Bureau of Statistics shows.[0] Industrial production rose 2.4 percent on a year-on-year basis in January to February period, up from a 1.3 percent increase in December.[1] This was lower than the 2.8 percent growth that economists polled by The Wall Street Journal had expected.[2] Fixed asset investment also grew 5.5 percent, higher than the 4.4 percent that had been forecast.[1]

The data suggests the expected recovery is broadly on track after posting one of its weakest years for growth in decades in 2022. Retail sales experienced an upswing, while industrial output experienced an increase in speed.[3] The largest contributor to growth was infrastructure investment, increasing the likelihood that the growth surge is overly reliant on government assistance.[3]

At the just-concluded session of the National People’s Congress, the country’s rubber-stamp parliament, the government set a cautious growth plan for this year, targeting around 5 percent GDP growth and a job creation target of 12 million.[4] However, Li Qiang, the new premier who took office on Saturday, admitted it’s “not an easy task” to achieve the stated goals due to the expected 11.58 million college graduates this year.[5]

Real estate investment fell more slowly at -5.7 percent year-on-year, an improvement from -10 percent in December.[6] This is in line with expectations and creates positive sentiment in the housing market, although a full return of sentiment is dependent on all uncompleted homes being finished to a good standard.[7]

Overall, the rebound in economic activity is providing some cause for optimism, although there are some headwinds that could derail infrastructure investment, such as exports and local government debt, as well as the slow recovery of the real estate sector.

0. “China’s Economy Rebounds, Spurred by Consumption – WSJ” The Wall Street Journal, 15 Mar. 2023, https://www.wsj.com/articles/chinas-economy-rebounds-spurred-by-consumption-d5975d0b

1. “Chinese industrial production rises in Feb, but misses expectations By Investing.com” Investing.com, 15 Mar. 2023, https://www.investing.com/news/economic-indicators/chinese-industrial-production-rises-in-feb-but-misses-expectations-3030665

2. “China’s economic activity shows modest rebound in first two months of the year” MarketWatch, 15 Mar. 2023, https://www.marketwatch.com/story/china-s-economic-activity-rebounded-moderately-in-first-two-months-of-the-year-6ba74e66

3. “China Economy Rebounds From Covid Slump as Spending Picks Up” Yahoo News, 15 Mar. 2023, https://news.yahoo.com/china-economy-rebounds-covid-slump-022656482.html

4. “China’s economic recovery is on track. But youth unemployment is getting worse” erienewsnow.com, 15 Mar. 2023, https://www.erienewsnow.com/story/48552247/chinas-economic-recovery-is-on-track-but-youth-unemployment-is-getting-worse

5. “China’s economic recovery is on track. But youth unemployment is getting worse | News Channel 3-12” KEYT, 15 Mar. 2023, https://keyt.com/news/2023/03/15/chinas-economic-recovery-is-on-track-but-youth-unemployment-is-getting-worse/

6. “China Shows A Gradual Recovery | MENAFN.COM” MENAFN.COM, 15 Mar. 2023, https://menafn.com/1105783196/China-Shows-A-Gradual-Recovery

7. “China shows a gradual recovery” ING Think, 15 Mar. 2023, https://think.ing.com/snaps/china-activity-shows-gradual-recovery-150323