Real GDP growth in 1Q/2023 was +4.5% y/y, an increase from the previous quarter (+2.9% y/y), but below 5% for seven consecutive quarters.
Although exports to Japan, the U.S., and Europe declined, those to ASEAN increased as exports of parts and other products advanced on the back of the accelerating horizontal division of labor that shifted production bases from China to ASEAN countries. This is mainly due to low production costs and low tariffs on exports to the U.S. in ASEAN countries.
Fixed asset investment in manufacturing and infrastructure construction remained strong, while real-estate development improved more than expected at -5.8% y/y compared to last year (-10.0% y/y for full-2022).
A look at market trends by industry finds that sales of durable goods such as automobiles, smartphones, PCs, and other electronic devices, home appliances, furniture, and other real-estate-related products have been weak. In addition, owing to the Common Prosperity policy and the aftereffects of the zero-COVID policy, there is a view that it will take two to three years for the private sector to regain confidence in the government and its strong pre-pandemic investment enthusiasm.
This year, making economic stability its number-one national policy and emphasizing its commitment to further strengthening its aggressive fiscal policy, the Chinese government is expected to focus on expanding infrastructure construction even more than in last year.
As for the real-estate market, real-estate sales are showing an unexpectedly rapid recovery, chiefly in first- and second-tier cities. However, given the fact that real-estate developers remain cash-strapped, real-estate development investment is unlikely to begin recovering until the second half of this year or later.
Total retail sales of consumer goods jumped 5.8% y/y, a sharp turnaround from the previous quarter (-2.7% y/y). This was supported by a rapid recovery in consumption of services such as wining and dining and accommodation as a result of the lifting of the zero-COVID policy. With that being said, consumers continue to be cautious in their purchasing attitudes as they are still uncertain about their future income.