Insights for What’s Ahead:

• Status of China’s Economic Recovery – China’s economic growth is rebounding, with Jan-Feb data showing an improvement in both supply- and demand-side indicators. The official growth target for 2023 was set at “around 5 percent.” Although this target has been referred to as “modest,” we believe it is realistic, and is in line with our own 2023 GDP forecast of 5.1 percent.
• Investment Trends – Investment into manufacturing and infrastructure saw relatively robust growth; and while real estate investment continued declining, the decline narrowed notably from December. Going forward, we expect infrastructure investment to continue growing at a faster pace than overall Fixed Asset Investment (FAI). 
• Consumption Trends – After contracting for three consecutive months, Jan-Feb retail sales growth moved into positive territory. China’s exit from zero-COVID is the key facilitator of this rebound. Meanwhile, headline CPI slowed down to 1 percent in February, largely due to seasonal declines, but we expect it to rise moderately in 2023 as consumption activities pick up.
• Trade Trends – Exports contracted -6.8 percent y-o-y in Jan-Feb, but the decline softened compared with December. Exports to the US saw the most significant decline, while exports to ASEAN remained resilient thanks to the region’s post-COVID economic rebound. Nonetheless, given the worsening global economy, a substantial decline in exports this year is unavoidable.
• Implications for Business – 2023 will be a challenging year for growth. While the Chinese economy is indeed rebounding, it still faces several headwinds. Domestic consumption remains below pre-COVID levels, and confidence is recovering at a slow pace. The property sector is bottoming from its protracted downturn, but its outlook remains uncertain. Local government finances are in a precarious situation. External demand is dropping due to the global growth slowdown. To make matters worse, the geopolitical environment continues deteriorating.