China is reporting mixed economic news following last week’s political gathering that saw President Xi Jinping strengthen his grip on nearly all facets of the economy and society.
Consumer activity, the leading economic issue discussed at the annual meeting of the country’s legislature, is humming along so far this year, according to new government data.
But factory output, long the driver of China’s rapid economic growth, is merely inching along — spraying cold water on increasingly bullish forecasts for the world’s second-largest economy.
The latest numbers for other areas, such as real estate and unemployment, paint an equally muddy picture.
“ ‘All these data suggest that the economy is healing better than expected.’ ”
— Hong Hao, chief economist, Grow Investment Group
“The numbers aren’t great, but I don’t think anyone expected them to be great given how China was afflicted by the spread of COVID in the first two months,” Pettis told MarketWatch. “They are definitely moving in the right direction.”
Hong Hao, chief economist of Grow Investment Group, concurred, saying, “All these data suggest that the economy is healing better than expected.”
The data come just days after China concluded its most important political summit of the year, which saw Xi begin his controversial third term in office by moving loyalists into key positions.
Top among them is his new No. 2, incoming premier Li Qiang, who told reporters on Monday that his focus was on “high-quality development” and improving citizens’ quality of life by lowering prices and stabilizing employment.
See: China President Xi to visit Moscow in apparent show of support for Putin
Also see: White House calls for China’s Xi to talk with Ukraine’s Zelensky
Yet the job market, along with the property sector, showed ongoing weakness in Wednesday’s data.
The jobless rate nudged up to 5.6% from 5.5% — worse than expected and slightly higher than the government’s upper-range target.
Doldrums in the real-estate market also persisted, with property investment falling 5.7% so far this year, according to Wednesday’s numbers.
The weakness in employment and property may bode poorly for a sustained rebound in consumer activity, analysts said, as they are key suspects behind why household wealth declined for the first time in at least two decades last year.
“This suggests that once the initial reopening rebound has happened, we shouldn’t expect a further surge in consumer spending,” Julian Evans-Pritchard, an analyst at Capital Economics, wrote in a recent note to investors.
Meanwhile, Chinese stocks may have come to the end of their five-month bull run.
The benchmark Shanghai Composite Index SHCOMP and Hong Kong’s Hang Seng Index HSI are both down this month following double-digit growth after China ended its strict “zero-COVID” restrictions late last year.
From the archives (January 2023): Chinese have been snapping up flights abroad as Beijing puts zero-COVID restrictions in the rearview mirror and Chinese New Year nears
“The market has hit the wall after a strong rally from the bottom in late October 2022,” Growth Investment’s Hong told MarketWatch.
“The U.S. banking failure remains an emotional overhang and potential for risk contagion. We are waiting on the sideline, and watching whether the Hang Seng can hold the 19,000 level before getting back in.”
Tanner Brown covers China for MarketWatch and Barron’s.