20230626-招银国际-China_Macro_Monitor__Growth_remained_sluggish_with_moderate_policy_easing_16页_1mb

CMB Global Markets | Equity Research

Economics Perspective | June 26, 2023

Growth Momentum & Policy Easing

• Economic High-Frequency Index: Declined in June, reflecting sluggish performance in exports, durable goods, and business investment, while passenger and tourist flows improved.
• GDP Forecast:
  • 2Q23: GDP growth expected to slow from 4.6% (1Q23) to 3.9%, recovering to 4.3% in 2H23.
  • Annualized GDP CAGR: 3.9% (2Q23) vs. 4.6% in 1Q23.
• Policy Stance: PBOC cut refinancing rates and LPRs (10bps), signaling moderate easing, but policymakers prioritize high-quality development.

Economic Activity & Sectoral Breakdown

• Service Sector:
  • Accounts for 60% of SMEs and urban employment.
  • Expected to drive private confidence and consumption in 2H23.
• Investment & Exports:
  • FAI YoY growth: Slowed to 3.7% (1H23).
  • Exports: June YoY growth likely dropped 6.5% (Fed pause in rate hikes supported commodity rebounds).
• Housing Market:
  • Sales softened, especially in lower-tier cities; prices more resilient in tier-1 cities.
  • Auto sales mildly slowed, but capacity utilization improved.

Inflation Trends

• CPI/PPI:
  • CPI growth expected to mildly rebound in 2H23 due to service recovery.
  • PPI likely hit the lowest YoY decline in June.
• Commodity Prices: Slight rebound in June linked to Fed rate pause, but downside risks persist.

Monetary Policy & Liquidity

• Liquidity:
  • Eased further with PBOC rate cuts; DR007 and 3M Shibor declined.
  • Credit demand remains weak, limiting aggressive easing.
• Currency: RMB weakened to 7.10 by end-2023, potentially reversing to 7.05 by 2024.

Key Risk Factors

• External Headwinds: Supply chain diversification by advanced economies and weak global demand.
• US Recession Risk: Inverted yield curve and tight credit conditions may constrain Chinese exports.
• Domestic Diversions: Policy focus on high-quality growth may delay stimulus.

Outlook

• GDP: Forecasted 5.7% full-year growth, with service-led recovery supporting consumption in 2H23.
• Currency: Depreciation likely until mid-2024, when RMB may stabilize due to US slowdown.
• Policy: Further fiscal and monetary measures expected, targeting SMEs, high-tech sectors, and consumer demand.