China’s Growth to Remain Above Target as Recovery Momentum Fades

Recent data point to a swiftly fading rebound in China from the reopening at end-2022, but GDP growth should still remain above the 2023 government target of 5% as consumption normalises and policy support buttresses infrastructure investment, says Fitch Ratings. We expect growth to hold up relatively well, albeit on a slowing trajectory, at 4.8% in 2024 and 4.7% in 2025.
Incoming data since April have pointed to weakness. The manufacturing Purchasing Managers’ Index, for instance, has been below 50 for the past three months, indicating contraction in manufacturing activity, while China’s exports fell by 12.4% yoy in June, with the sector outlook remaining clouded by weak global demand prospects. Housing construction also remains very weak.
In line with this, real GDP growth in 2Q23 was below our expectation at 6.3% yoy, after the unexpectedly strong 4.5% expansion in 1Q23. Nonetheless, Fitch still expects growth of 5.6% in full-year 2023 as the economy normalises following very weak consumption growth in 2022.

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