City skyline in China

China Economic Forecast

China Economic Outlook

Annual economic growth slowed to 2.9% in Q4 on softer expansions in industry and services, as tighter Covid-19 restrictions in October–November and an explosion of virus cases at the end of the quarter hurt momentum. Moreover, an over 6% year-on-year decline in merchandise exports suggested weakening external demand. More positively, the economy appears to be recovering briskly so far this year, thanks to the removal of restrictions in December and the rapid subsiding of virus cases. Both the manufacturing and the non-manufacturing PMIs surged in January, and mobility data is far higher this year than in the same period in 2022. That said, vehicle sales slumped in January due to the expiration of fiscal benefits. In addition, the housing recovery seems sluggish, with ongoing annual declines in home sales and mortgage loans so far in 2023.

China Inflation

Consumer inflation rose to 2.1% in January from December’s 1.8%. Producer prices fell 0.8% year on year in January, following December’s 0.7% drop. Both consumer and producer prices are seen picking up from current levels later this year. Still, they should remain muted nonetheless due to a stronger yuan, easing supply disruptions and softer external price pressures.

China Economic Data

2017 2018 2019 2020 2021
Population (million) 1 1 1 1 1
GDP (USD bn) 12 13 14 14 17
GDP per capita (USD) 8 9 10 10 12
GDP (CNY bn) 83 91 98 101 114
Economic Growth (Nominal GDP, ann. var. %) 11.5 10.5 7.3 2.7 12.8
Economic Growth (GDP, ann. var. %) 6.9 6.7 6.0 2.2 8.4
Private Consumption (ann. var. %) 9.5 8.3 6.4 -2.5 13.3
Nominal Fixed Investment (ann. var. %) 7.2 5.9 5.4 2.9 4.9
Industrial Production (ann. var. %) 6.6 6.2 5.7 2.8 9.6
Retail Sales (ann. var. %) 10.2 9.0 8.0 -3.9 12.5
Disposable Income (ann. var. %) 8.3 7.8 7.9 3.5 8.2
Wages (ann. var. %) 10.0 10.9 9.8 7.6 9.7
Unemployment (% of active population, eop) 5.0 4.9 5.2 5.2 5.1
Fiscal Balance (% of GDP) -3.7 -4.1 -4.9 -6.2 -3.8
Public Debt (% of GDP) 51.7 53.8 57.2 68.1 -
Money (ann. var. of M2 %) 9.0 8.1 8.7 10.1 9.0
Inflation (CPI, ann. var. %, eop) 1.8 1.9 4.5 0.2 1.5
Inflation (CPI, ann. var. %, aop) 1.6 2.1 2.9 2.5 0.9
Inflation (PPI, ann. var. %, eop) 4.9 0.9 -0.5 -0.4 10.3
Inflation (PPI, ann. var. %, aop) 6.3 3.5 -0.3 -1.8 8.1
1-Year Loan Prime Rate (%, eop) 4.30 4.31 4.15 3.85 3.80
7-Day Reverse Repo Rate (%, eop) 2.50 2.55 2.50 2.20 2.20
1-Year Deposit Rate (%, eop) 1.50 1.50 1.50 1.50 1.50
10-Year Bond Yield (%, eop) 3.88 3.23 3.14 3.14 2.78
Exchange Rate (CNY per USD, eop) 6.51 6.88 6.96 6.53 6.36
Exchange Rate (CNY per USD, aop) 6.76 6.62 6.91 6.90 6.45
Current Account Balance (USD bn) 188.7 24.1 102.9 248.8 317.3
Current Account Balance (% of GDP) 1.5 0.2 0.7 1.7 1.8
Merchandise Trade Balance (USD bn) 420 351 421 524 670
Merchandise Exports (USD bn) 2 2 2 2 3
Merchandise Imports (USD bn) 1 2 2 2 2
Merchandise Exports (ann. var. %) 7.9 9.9 0.5 3.6 29.6
Merchandise Imports (ann. var. %) 16.1 15.8 -2.7 -0.6 30.0
Foreign Direct Investment (USD bn) 136 138 141 149 181
International Reserves (USD bn) 3 3 3 3 3
International Reserves (months of imports) 21.1 17.8 18.6 19.5 15.3
External Debt (USD bn) 1 1 2 2 2
External Debt (% of GDP) 14.3 14.3 14.5 16.3 15.5

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