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
- 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.