Macro data suggests that China has made a solid start to the year, having relaxed its zero-COVID strategy in late 2022

China traditionally aggregates its January and February numbers to offer a comparable picture as Chinese New Year can take place in either month depending on the year. The 2023 data from China’s National Bureau of Statistics (NBS) was, by and large, in line with market expectations.

Industrial production rose 2.4% year-on-year, slightly below the consensus forecast of 2.6%, but above the 1.3% December reading. Retail sales rose 3.5% year-on-year, in line with expectations. As China’s rebound is expected to be driven by domestic consumption, this number may look a bit low, but one should consider the high 2022 base. Retail sales are poised to accelerate over the course of the year as consumers’ confidence returns.

Fixed asset investment was up 5.5% year-on-year, above expectations and above the 5.1% annual rise for 2022 as a whole. Meanwhile, infrastructure spending rose 9% year-on-year, although property investment was down 5.7%, reflecting the caution of home buyers and developers.

With the construction season starting this month, the next set of macro numbers will provide the market with a clearer indication of China's economic rebound.  Nonetheless, these various data point towards a slow but steady recovery of the Chinese economy post-Covid, already evidenced by the strong February PMI reading of 52.6. Project Blue views are unchanged: we believe that the 5% GDP target set by the National People’s Congress earlier this month looks more like a floor than a forecast and we maintain our 2023 growth target of 5.5% with domestic consumption being the main driver.

Despite Beijing's seeming reluctance with regard to stimulus, it is also possible that any potential shortfall in relation to the 2023 target would be addressed via infrastructure spending as the Chinese government cannot afford another miss in terms of its economic target. We note that exports are likely to remain the weak point for China’s economy in 2023, given the prevailing global macro uncertainty.