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China releases the chains of Covid by announcing a surprise growth

China releases the chains of Covid by announcing a surprise growth

China releases the chains of Covid by announcing a surprise growth.

China’s economy was more robust during its Q4 “exit waves” due to Covid than most people had hoped for.

In addition, with indicators of high frequency suggesting that activity has started to increase since the amount of Covid disease has diminished and the outlook for the near future for the Chinese economy is positive.

It is likely that growth will be more robust than previously thought and should further boost gains from local assets.

Based on the government’s official accounts of China the Chinese economy slowed down at the end of the fourth quarter in 2022.

This was higher than the forecast consensus of the country’s economy shrinking by about one percent, as the initial locking downs, and later the complete abrogation of the government’s zero-Covid policy, which impacted economic activity.

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In the end, the annual growth of GDP slowed down to 2.9 percent in the fourth quarter of 2014 from 3.9 percent in Q3. so that the economy expanded by 3 percent in 2022 as in all.

The majority of the surprise upside during Q4 was due to domestic demand. December’s activity figures that were released alongside the GDP figures for Q4 revealed that fixed asset investment was robust.

 China releases the chains of Covid by announcing a surprise growth

However, it was the consumer sector that performed much less in comparison to what was expected. Leading indicators like that of NBS non-manufacturing PMI indicated an even greater drop in retail sales following an increase of 6% in November. However, in the end retail sales grew only 1.8 percent year-on-year in December.

In many ways Q4 is in many ways outdated, given that the lifting from all Covid restrictions has improved the prospects.

The sectors that are geared towards consumers will reap the greatest benefit due to the release of the accumulated demand, and also improvements within the property market.

Indicators that are high-frequency like the volume of domestic flights and traffic numbers indicate that this is taking place. This puts us in the direction of our “China rapid opening” scenario, which predicts GDP growth of 6-7 percent by 2023.

A better year for growth will not be a sign of the ending of the slowdown in structural growth which began over 10 years ago. If there isn’t an expansive expansion in credit in Q1, it will likely slow down in 2024. But the short-term outlook is far higher than what was anticipated and should help further boost local assets.

By Debbik S.

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