20221101-招银国际-China_Economy__Growth_slowed_as_the_epidemic_resurged_5页_654kb

China Economy Summary

Core Content

China's economy experienced a slowdown in October 2022, primarily driven by the resurgence of the epidemic and the continued implementation of the zero-COVID policy. This led to a contraction in key economic indicators, particularly in the manufacturing and service sectors, as well as in retail trade, air transportation, and related industries. The housing market also remained weak, with PMI in furniture and construction & decoration materials showing limited improvement.

Looking ahead, the report suggests that China will gradually resume economic activity in 2023, with a focus on moderate easing policies. The housing market and household consumption are expected to show slow recovery. The GDP forecast for 2022 was maintained at 3.5%, while the forecast for 2023 was revised downward from 5.5% to 5%.

Main Views and Key Information

Economic Performance in October 2022

• PMI Decline: Both manufacturing and service PMI fell into contraction territory, indicating a slowdown in economic activity.
  • Manufacturing PMI dropped from 50.1% in September to 49.2% in October.
  • Service PMI decreased from 48.9% to 47% in October.
  • Construction PMI fell from 60.2% to 58.2%, but remained in the expansionary range due to strong infrastructure investment.
• New Order Index: Declined in manufacturing and construction, showing weakened demand.
  • Manufacturing new orders dropped from 49.8% to 48.1%.
  • Construction new orders fell from 51.8% to 48.9%.
  • Service new orders remained low at 41.7%.
• Business Expectation Index: Slightly declined in manufacturing but improved in construction and service.
  • Manufacturing business expectations fell from 53.4% to 52.6%.
  • Construction and service expectations rebounded to 64.2% and 56.7%, respectively.
• Material Cost Index: Increased in both manufacturing and service sectors.
  • Manufacturing material cost rose from 51.3% to 53.3%.
  • Service material cost increased from 49.6% to 50.8%.
• Ex-factory Price Index: Remained weak, with only marginal increases.
  • Manufacturing ex-factory prices increased from 47.1% to 48.7%.
  • Service ex-factory prices rose from 47.5% to 47.8%.
• Employment Index: Declined across all three sectors, indicating increased unemployment pressure.
  • Manufacturing employment fell from 49% to 48.3%.
  • Construction employment dropped from 48.3% to 47.8%.
  • Service employment decreased from 46.3% to 45.8%.

Outlook for 2023

• Gradual Reopening: The economy is expected to gradually reopen, with continued moderate easing policies.
• Housing and Consumption Recovery: Housing market and household consumption are anticipated to slowly resume next year.
• Key Determinants:
  • Dynamics of the zero-COVID policy.
  • Economic and property policy conditions.
  • Overseas recession risk.

CMBIGM Ratings

Rating	Description
BUY	Stock with potential return of over 15% over next 12 months
HOLD	Stock with potential return of +15% to -10% over next 12 months
SELL	Stock with potential loss of over 10% over next 12 months
NOT RATED	Stock is not rated by CMBIGM

Industry Rating	Description
OUTPERFORM	Industry expected to outperform the relevant broad market benchmark over next 12 months
MARKET-PERFORM	Industry expected to perform in-line with the relevant broad market benchmark over next 12 months
UNDERPERFORM	Industry expected to underperform the relevant broad market benchmark over next 12 months

Analyst Certification

The analyst certifies that:

1. All views expressed accurately reflect their personal views.
2. No part of their compensation is directly or indirectly related to the specific views in the report.
3. They have not traded in the stocks covered in the report within 30 days prior to the report's issue.
4. They will not trade in the stocks covered in the report within 3 business days after the report's issue.
5. They do not serve as officers of any Hong Kong listed companies covered in the report.
6. They have no financial interests in the Hong Kong listed companies covered in the report.

Important Disclosures

• The report is for informational purposes only and not investment advice.
• It is not an offer or solicitation to buy or sell any security.
• CMBIGM is not liable for any loss or damage incurred from relying on the report.
• The information is based on publicly available data and may change without notice.
• The report may include recommendations or views that differ from other publications.
• CMBIGM may have conflicts of interest due to its market-making activities.

Legal and Distribution Information

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• Singapore: Distributed by CMBISG, an Exempt Financial Adviser, and only to Accredited Investors, Expert Investors, or Institutional Investors.

Contact Information

• Bingnan YE, Ph.D.

  • Email: yebingnan@cmbi.com.hk
  • Tel: (852) 3761 8967

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