China: Economic recovery expected to remain uneven – UOB

UOB Group’s Economist Ho Woei Chen, CFA, assessed the outlook for the Chinese economy amidst the ongoing recovery.

Key Quotes

“The economic data releases for April continued to show an uneven recovery in China. The largest improvement was in the industrial production (IP) which turned in the first expansion since the start of the year, coming in above consensus expectation at +3.9% y/y which was led by manufacturing of specially-used equipments (+14.3% y/y) and telecommunication equipments/computers (+11.8% y/y).”

“Despite some improvements, indicators such as retail sales and fixed-asset investment were visibly sluggish and remained in contraction in April. Despite the large YTD contraction in infrastructure investment, real estate investment has fallen by a more moderate - 3.3% y/y YTD.”

“The April economic indicators including unexpected gains in exports suggest that the outlook continues to improve for China amidst the easing in domestic supply constraints. However, the pace of recovery will remain dependent on the easing of lockdown measures elsewhere. Notably, the new export orders component of the manufacturing PMI fell sharply in April indicating that external demand has weakened.”

“The annual National People’s Congress (NPC) to be held in Beijing starting next Friday (22 May) is expected to reaffirm the need to boost counter-cyclical measures to support this nascent economic recovery.”