Overview of China’s Economic Performance

As the country entered its second month without Covid-19 limitations in January, China’s economy started to show some indications of growth, though the impact was muted due to the significant holiday season. Eight early indicators tracked by Bloomberg indicated a minor uptick in activity as opposed to a fall in December when the economy shrank in reaction to a significant Covid-19 outbreak.

Traveling During Lunar New Year Holiday

January marked the first time that Chinese citizens were able to travel during the Lunar New Year holiday period without significant restrictions since the start of the pandemic. Over 300 million trips were made during the holiday, almost 90% of pre-pandemic levels, according to the Ministry of Culture and Tourism. The box office figures also increased, surpassing last year’s holiday.

Rise in Consumption

Consumption has been viewed as a crucial driving force for the world’s second-largest economy this year, especially as the global economy cools. China’s State Council stated that the country needs to speed up its consumption recovery, as reported by CCTV over the weekend. During the festival period, restaurant revenue rose nearly 25% from a year ago, according to a survey from the China Cuisine Association. Major retail and catering firms also saw their sales jump nearly 7% year-on-year, reported by CCTV citing figures from the Ministry of Commerce.

Investor Optimism

Investor optimism was evident in major onshore stocks before the holiday began, as investors cheered the reopening and fading outbreaks. After losing momentum in December, the CSI 300 Index regained traction in January, advancing about 8% ahead of the holiday week compared to the end of last month. The benchmark equity gauge was set to enter a bull market as trading resumed on Monday.

Mixed Indicators

Not all indicators were positive, as business activity slowed during the Lunar New Year season, and the global economy continued to struggle. Confidence among small businesses improved in January compared to December, with real estate, transport, accommodation, and catering activity seeing a sharp rebound, according to Standard Chartered Plc. However, the index measuring confidence fell just short of expansion, and a sub-index measuring manufacturing activity retreated “partly due to the holiday effect,” according to Standard Chartered economists Hunter Chan and Ding Shuang.

The decline in Car and Home Sales

Car and home sales decreased in the first weeks of January. Data from China Real Estate Information Corp., which tracks 40 major cities, showed that residential sales by area declined 14% from a year earlier during the week that included the holiday, indicating that the sector remains a concern. Factory-gate prices remained in deflation, though not as deeply as in November and December.

Struggling Global Economy

Early trade data from South Korea showed that the global economy continues to struggle, with exports falling 2.7% in the first 20 days of the month. Although the headline number was better than December’s 8.8% fall, there were some concerning aspects. Shipments to China fell 24.4% in the period, highlighting the long road ahead for the recovery of the world’s second-largest economy, even after restrictions were lifted.


While economists have upgraded their GDP forecasts for 2023, they have also warned that disruptions and the Lunar New Year holiday will likely impact the first quarter before the rebound takes hold.

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