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China GDP Q4 2023

China: Economy picks up in Q4 but remains lackluster

GDP growth accelerated to 5.2% year on year in the fourth quarter, from 4.9% in the third quarter. The reading was slightly below market expectations of 5.3% growth. That said, a favorable base effect flattered the Q4 reading, as Covid-19 disruptions saw GDP growth slow sharply in Q4 2022. On a seasonally-adjusted quarter-on-quarter basis, economic growth moderated to 1.0% in Q4, compared to the previous period’s 1.5% increase. Over 2023 as a whole, the economy expanded 5.2%, beating the government’s conservative 5.0% target.

The services sector grew 5.3% annually in the fourth quarter, edging up from the third quarter’s 5.2% increase. In addition, the industrial sector gained steam, growing 5.5% in Q4 (Q3: +4.6% yoy). Agricultural sector growth was stable at 4.2% in Q4. Looking at data for December, industry and investment growth overshot market expectations, while retail sales were notably below expectations. Moreover, housing market data was soft: Home prices continued to fall in monthly and annual terms, and both home sales and property investment fell by double digits year on year.

Our Consensus is for annual GDP growth to slow in Q1 as the base effect turns less favorable. Despite support from a cyclical upturn in the global electronics sector and previous piecemeal stimulus measures, economic momentum will remain held back by a sluggish property sector, Western trade and tech restrictions, shaky economic sentiment and a lack of more substantive stimulus measures.

On the 2024 outlook, Standard Chartered analysts said:

“We maintain our 2024 GDP growth at 4.8%, higher than market consensus’ 4.5%. We expect the housing market and net exports to become less of a drag on the economy in H2 given likely continued policy support and a boost to global demand as the US and Europe start to lower rates. Near-term, we expect China to ease monetary policy further amid still-weak consumer confidence and a continued housing-market slowdown.”

In contrast, Nomura analysts are notably more pessimistic:

“As Beijing appears reluctant to introduce more forceful policy stimulus measures to shore up economy, we expect the current economic dip to continue into the spring of 2024. With annualized sequential GDP growth at 4.1% in Q4, we maintain our 2024 annual GDP growth forecast at 4.0%.”

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