China Economic Outlook. March 2023

Summary

2023 will be the “Year of China” after the authorities lifted “zero Covid” policy amid the global economic slowdown. How to rebuild market confidence and repair the household and enterprises’ balance sheets become the main challenges in the post-pandemic era.

Key points

• Key points:
• We raise our 2023 GDP to be 5.2% from 5% previously, based on faster-than-expected “zero Covid” lift and better-than-expected economic resilience in US and EU.
• The economic recovery has been broad-based, while the main growth engine in 2023 will be domestic consumption, infrastructure and manufacturing investment instead of external demand.
• The annual "two sessions" secured a stable political leadership transformation, launched institutional reforms of the State Council, promulgated a series of economic targets and policy stimulus measures.
• Reflation risk seems contained at the current stage as supply side could quickly catch up to meet rising demand domestically, although the markets worry China's reopening will spillover inflation to the world.
• How to rebuild market confidence and to repair the household and enterprises’ balance sheets become the main challenges in the post-pandemic era.

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