HONG KONG SAR – Media OutReach – December 13, 2022 – KPMG China has released its China Economic Monitor report for the fourth quarter of 2022. According to the report, China’s economy grew 3.0% year-on-year in the first nine months of 2022. Q3 grew 3.9%, 3.5 percentage points higher than Q2 and better than market expectations. On a quarterly basis (qoq), the economy grew 3.9% in the third quarter, a significant improvement from the growth rate of -2.6% in the second quarter. “We expect China’s economy to accelerate its recovery in 2023,” said Kevin Kang, chief economist at KPMG China. “Pandemic impact, housing market downturn and shifts in international geopolitics are some of the factors that slowed second quarter GDP growth. However, stable government policies continued to support the recovery in the third quarter and China’s economy continues to show resilience.”
China’s National Health Commission (NHC) issued a circular in early November 2022 announcing 20 new measures to further streamline Covid-19 control measures. In addition, in early December, the government released a new 10-point plan to further ease Covid containment. The new measures include steps to make it easier for overseas travelers to enter mainland China, such as: B. reducing the quarantine period and removing the rules for indirect contact and medium-risk areas. Further fine-tuning is expected in the coming months to effectively contain the virus while minimizing its impact on economic and social development.
In the first three quarters of 2022, the cumulative industrial value added recorded a solid growth of 3.9% year-on-year, up 0.5 percentage points compared to the first half of 2022, the industrial value added in the third quarter increased by 4.8% in the year year-to-year comparison.
China’s overall consumption slowly recovered due to the resurgence of Covid-19 infections in some areas of China, and cumulative total retail sales growth rose 0.7% year-on-year in the first three quarters, up 1.4 percentage points year-on-year first half of 2022. In terms of retail sales, auto consumption grew 18.2% yoy in the third quarter, solid growth compared to the second, due to the recovery in manufacturing and supply chain and the introduction of stimulus measures such as the reduction in vehicle purchase tax and the second quarter drivers of consumption. In addition, sales of housewares remain strong and cumulative sales of retail goods grew 1.3% year-on-year, up 1.2 percentage points compared to the first half of 2022. However, the pandemic is having an impact on consumer confidence, the recovery from The hospitality sector remained anemic, falling 1.7% in September, down 10 percentage points from August. The general recovery in consumer markets has yet to be consolidated.
Investments in property, plant and equipment increased by 5.9% year-on-year in the first three quarters of 2022, the third quarter increased by 5.6%, up 1.1 percentage points from the second quarter. With better weather conditions and accelerating infrastructure construction, industrial production showed a rebound in the third quarter and infrastructure investment rose 14.6% yoy.
Influenced by a higher baseline and significantly weighing on global demand, China’s export growth rate fell for three straight months, with exports falling 0.3% yoy in October. Due to the heightened risk of recession in the US and the recovery of US consumers from goods to services, the year-on-year growth rate of Chinese exports to the US turned negative since August, falling by 12.6% yoy in October. In addition, the growth rate of exports to the EU also fell in the third quarter, down 9.0% yoy in October, which in turn hampered exports. It is noteworthy that the Regional Comprehensive Economic Partnership (RCEP), which officially came into force this year, has had a positive impact on China’s trade with the relevant countries. China’s exports to ASEAN are still growing strongly, maintaining a growth rate of more than 20% for six consecutive months since May, becoming the main contributor to exports.
On the import side, China’s total imports were essentially flat in the third quarter yoy, however the yoy growth rate turned negative in October. On the one hand, the decline in commodity prices reduced the number of imports and, on the other hand, also reflected the ongoing weak domestic demand. Looking ahead, the continued slowdown in foreign demand in the fourth quarter has increased downward pressure on exports. However, against the backdrop of high global inflation and geopolitical conflicts, the cost advantage of Chinese products and the advantage of the industrial chain will keep China’s export growth resilient
China’s monetary policy continues to support economic growth and its stance will remain accommodative in the next sentence. On the aggregate side, it will provide a reasonable abundance of liquidity and increase credit support to the real economy. On the structural side, China will step up its direct lending support in a policy package that includes special lending facilities that benefit small and medium-sized enterprises, green finance, technology and the elderly care industry.
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