China Economic Outlook. December 2023

Summary

China’s 2023 Q3 economic activities are better-than-expected and stronger than Q2 outturns amid policy support, showing some bottomed-out signals after Q2’s dipping.

Key points

• Key points:
• The bottom-out was mostly from retail sales, the industrial production also fares well and the exports shrank its decline.
• However, the recovery has not got a solid foundation-real estate crash and local government bonds still remain the main risks and these two issues are highly correlated.
• Based on the recent Q3 data, we raise our 2023 GDP forecast from 4.8% to 5.2%, (BBG consensus: 5.1%: IMF 5.4%) and maintain 2024 at 4.4%.
• Monetary and fiscal policy remain easing to support growth recovery. The highlight of the recent fiscal easing includes the newly announced RMB 1 trillion special government bond increasing fiscal deficit from 3% to 3.8%.
• We summarize what were settled and what were unsettled during the Xi-Biden meeting and the outlook of China-US relationship.

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