The country's rapid transition towards endemic living led to a substantial upward revision of our forecast.
  • Monthly data for December and high frequency data for January show that activity is picking up sharply. 

  • The rapid transition towards endemic living has led to a major upward revision to our growth forecast. We now expect GDP growth to reach 5.5% in 2023. 
  • The surge in Chinese bank deposits overstates the extent of “excess savings”, but one does not need to appeal to a deposits rundown to believe consumption can rebound. Returning to normal rates of consumption out of income should be enough for nominal consumption to rise by around 14% in 2023. 
  • If households tap the RMB 4.2tn buffer built up over the pandemic, annual consumption growth could reach 20%. But the potential for this to trigger stronger services inflation, or leak into foreign holidays could also temper the boost to real GDP. 
  • Policy rhetoric may have turned ‘pro-growth’, but it is unlikely that the authorities will really increase stimulus when the economy is rebounding. 
  • Our Chinese Financial Conditions Index has moved out of accommodative territory, while local governments are likely to dial back infrastructure spending to repair their fiscal positions.