• Consumption Trends – Retail sales continue to strengthen, but catering services growth turned negative in November. This underscores the point that full recovery in consumer-services spending will be difficult to achieve until COVID is resolutely contained. The current consumer price deflation is expected to be temporary. Large-scale subsidy programs to promote consumer spending are considered unlikely in the coming year.

• Trade Trends – China’s export growth continues to beat expectations; exports jumped to a nearly 3-year high in November. Strong global demand for pandemic-related goods will likely continue until the pandemic downtrends mid-2021.

Implications for Business

November data confirm that China’s economic recovery continues apace. Growth in exports, manufacturing investment, and retail sales (in real terms) all exceeded pre-COVID levels in November. The Central Economic Work Conference last week vowed continuity in policy support in 2021 which reduced market concerns over a sharp policy shift. Recovery growth should thus sustain through 1H 2021, even with marginal credit tightening. Given the low base of comparison from 2020, China’s GDP is expected to expand 8.1 percent in 2021. While the near-term outlook is optimistic, headwinds are anticipated in late 2021 as a function of slowing exports and property investment and tightening liquidity conditions. Moderating demand caused by these factors will drag on industrial profitability and manufacturing investment.

Note: Member businesses in China are driven, in general, by one or more of three key economic factors: Investment, Consumption and Trade. Our monthly "Economy Watch: China View” analysis assesses each factor in turn to inform business planning and forecasting.