China | The economy shows resilience amid policy support

Summary

Chinese economy shows resilience in August after a bumpy recovery path since the Shanghai lockdown lifted amid the easing of fiscal and monetary policy support.

Key points

• Key points:
• Unlike the previous month, August’s economic indicators, namely retail sales, industrial production and fixed asset investment, all bounced back from their previous readings and the market expectations.
• The pace of recovery depends on several factors: whether further large-scale lockdowns will be imposed again, how large is the policy room, how effective the monetary transmission mechanism is and how to rebuild market sentiments in real estate.
• On the supply side, industrial production in August picked up to 4.2% y/y from 3.8% y/y in July, higher than the market consensus at 3.8% y/y.
• Retail sales accelerated from previous 2.7% y/y in July to 5.4% y/y, significantly higher than the market consensus at 3.5% y/y. FAI also marginally picked up to 5.8% ytd y/y from 5.7% ytd y/y in the previous month.
• Due to the persistence of “zero COVID” strategy as well as the housing market crash, we lowered our 2022 whole year prediction from previous 4.5% to 3.6%.

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