China confirmed a growth of 5.2% over the entire year 2023. Broadly in line with the objective set by the Beijing authorities and well above the growth rates achieved in the West, this figure nevertheless leaves investors cold because many shadows persist: With an increase of 4.6%, the industrial sector is growing slower than the economy.
Retail sales are up 7.2%, but the unease of the Chinese consumer is undeniable: the unemployment rate is up to 5.1%, and that of young people is no longer even published. Real estate prices fell slightly (-0.4% over one year and December), and the financing problems of the sector are far from being solved. As a result, investment grew by only 3% over one year.
Therefore, The domestic market situation remains gloomy, while exports suffer from the slowdown in Western economies. Investors also ask questions about Beijing’s increasingly heavy intervention in business life. Once one of the jewels of China’s economy, the technology sector lives with the restrictions imposed by Beijing – which is worried about seeing it become too strong – and Washington – which sees it as a threat. Attacked from all sides, it is experiencing difficult days on the stock market, and the Chinese market is affected, posting a poor performance in 2023 and at the beginning of the year.
He is not alone: The financial sector, which accounts for 15% of the MSCI China, is being used to stabilise the situation in the real estate market, with little result to date, except the fear of seeing the sector’s profits collapse.
In short, if growth is there, the measures taken by Beijing have still not allowed a proper restart of the Chinese economy. Investors are still doubting, and it is not the country's demographic profile that will reassure them. In 2023 the number of births dropped sharply while the number of deaths increased sharply to more than 11 million (an increase no doubt linked to the sudden exit from the country from covid-related restrictions at the end of 2022). China’s population fell by 2 million in 2023 to no more than 1.41 billion.
Suppose Beijing has already shown its ability to stimulate sectors that the authorities consider strategic (such as sectors related to the energy transition, automotive, or semiconductors). In that case, seeing broader than these few sectors will be necessary to restart the second world economy. Fortunately, they have the means to do so.
We remain invested in the Chinese markets as part of our diversified portfolio.
