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China economic recovery seen improving in March, on track for 5% annual GDP- Citi

Published 03/04/2024, 07:10
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- Recent economic indicators suggest that the Chinese economy picked up pace in recent months, putting the country on track to potentially achieve the government’s annual 5% gross domestic product target, Citi analysts said in a note.

Citi had recently upgraded its GDP growth forecast for China to 5%- bringing it in line with Beijing’s outlook, and said in a note this week that recent positive purchasing managers index data from the country reinforced this view.

Citi analysts also forecast some improvements in upcoming economic readings for March, including trade data, industrial production, fixed capital expenditure and lending activity. 

Official PMI data showed last week that China’s manufacturing sector returned to growth in March, while non-manufacturing activity picked up. This data was complemented by private PMI surveys showing improvements in both manufacturing and services activity. 

“We expect GDP growth to hit 5.1%YoY in 24Q1E, well on track to the ~5% growth target this year. The monthly indicators could continue to show the entrenched dual-tracked pattern,” Citi analysts wrote in a note. 

Still, they noted that export growth could turn negative in March due to a higher base for comparison from the prior year. But overseas demand is expected to have improved, especially as recent PMI data showed an improvement in export orders. 

Citi analysts said they expected social financing to pick up in March from the prior month, but that the improvement would likely be middling. 

But on the other hand, headwinds from the property market are expected to continue, while China’s deflationary trend is widely expected to persist. While the Lunar New Year holiday helped spur some consumer spending in the January-February period, this boost is likely to have run out in March, especially amid softer food prices.

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Producer price inflation is also expected to remain largely in contraction, Citi analysts said. 

While China’s economy showed some signs of improvement so far in 2024, it still has a long road back to pre-COVID growth levels. Government reluctance towards rolling out more stimulus measures has also left investors clamoring for more. 


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