China: Recovery remains well in place – UOB

Economist Ho Woei Chen at UOB Group reviews the latest set of data releases in the Chinese economy.

Key Takeaways

“The Jan-Feb data released today were largely in line with consensus forecasts and expectation of an economic rebound but the surprise rise in the national surveyed jobless rate cast a pall on the outlook.”

“The improvement was most apparent in retail sales which reversed from declines in the three preceding months to register a growth of 3.5% YTD y/y in Feb.”

“We are maintaining our 2023 growth forecast for China at 5.2% with 1Q23 expansion likely at around 3.4% y/y (4Q22: 2.9% y/y). Challenges from its real estate market and the downturn in global demand continue to be the main economic headwinds.”

“The People’s Bank of China (PBoC) kept its 1Y medium-term lending facility (MLF) rate at 2.75% in Mar and net injected CNY281 bn. This likely implies no change to the 1Y loan prime rates (LPR) at the rate setting next Mon (20 Mar). More important to watch will be the 5Y LPR as a reduction to the rate will signal strong government support to the real estate sector. Having said that, there could still be targeted support to certain sectors while a further cut to banks’ reserve requirement ratio (RRR) remains a possibility.”