ab17 January 2024Global Research and Evidence LabChina Economic Perspectives2023 GDP Growth at 5.2%, Lift 2024 Growth Forecast to 4.6%Q4 GDP growth edged up to 5.2%y/y on low baseQ4 GDP growth slowed sequentially from Q3 but a low base pushed up the y/y growth to 5.2%. 2023 full-year GDP growth recorded 5.2% in real terms and 4.6% in nominal terms, in line with our expectation. The low base drove up the y/y growth of retail sales, exports, infrastructure FAI and manufacturing FAI, as did industrial production growth. December data suggest that property activities are yet to bottom, with sales and starts declining further from the November level. Retail sales decelerated as low base effect faded, while both manufacturing and infrastructure investment growth picked up. Growth of export volume picked up further in December, leading to a notable rebound in Q4 from Q3. Revise up 2024 GDP growth forecast to 4.6%The slightly stronger Q4 GDP growth outturn (5.2% vs 5.0% of our original forecast) and the revision of q/q growth in the previous quarters push the 2024 annual growth to 4.6% (vs. 4.4% previously envisaged), without any revision of our q/q sequential growth forecasts. In the coming months, we expect property activities and property market to stabilize, helping to underpin household confidence. That should support continued post-Covid consumption recovery along with the economy and labor market, though at a slower pace. Infrastructure investment growth is not expected to accelerate despite more explicit fiscal support. We forecast exports to improve modestly on the upswing of the global tech cycle despite the expected slowdown in US growth. More policy support ahead; new PSL in focusWe expect more policy support ahead, though likely modest in scale. We see a headline fiscal deficit of 3.5-3.8% (potentially including issuance of special CBG), a larger special LG bond quota and additional debt-swap LG bonds. We see limited monetary policy actions, potentially a 10-20bps MLF rate cut and 25-50bp RRR cut, and liquidity facilities to help accommodate fiscal expansion. We also expect more property policy easing including more credit support to developers and using the low-cost funding underpinned by PSL to support the purchase of existing housing inventory. We are looking for clarity on the size and use of PSL funding in the months ahead, but expect much smaller impact on the housing market than that of shanty town renovation during 2015-2018.This report has been prepared by UBS Securities Asia Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 7. EconomicsChinaTao WangEconomist wang.tao@ubs.com +852-2971 7525Ning ZhangEconomist ning.zhang@ubs.com +852-2971 8135Jennifer ZhongEconomistS1460516050002 jennifer-a.zhong@ubs.com +86-105-832 8324Grace WangAssoci...
