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Foreword
Rethinking the macro landscape
Reframing globalisation
Redefining sustainability
China’s manufacturing investment picks up
Growth (% y/y, 3 mma)
30
20
10
0
-10
-20
2015
2016
2017
2018
2019
2020
2021
2022
2023
Nominal FAI
Real estate development
Infrastructure
Manufacturing
Source: Eastspring Investments, NBS, UBS; as of October 2023. FAI = Fixed Asset Investment.
For sure, 2023 has been difficult. The downbeat sentiment on Chinese equities lingers, given slower than expected growth, lesser than expected stimulus support and the continued weakness in the property sector. In October, the government announced that it will issue an additional RMB 1 trillion special central government bonds in the fourth quarter of 2023. This significant move indicates the government’s priority to maintain steady growth in 2024. Nevertheless, given the muted market reaction to previous stimulus measures, the focus has shifted to “whether another round of massive easing will work”. Still there are some positive signs; on a quarter-on-quarter basis; 3Q2023 GDP grew by 1.3%, exceeding the 1.0% forecast, industrial output grew by
4.6% in October 2023 from a year earlier versus the forecast of 4.4%, and consumption also beat expectations. But given that the property weakness may persist for longer, China’s headline growth will grind lower. It is however worth noting that China’s move to rebalance its growth model from investment-led to consumption-based is taking place at a faster pace. In the first three quarters of 2023, consumption contributed 83.2% to the headline GDP growth compared to 58.6% in 2019. Overall, there are structural opportunities in sectors that will gain from policy support and the consumption tilt such as advanced manufacturing, health care and consumer.
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