China’s Recovery On Track According to Latest Data

China Reopening

Chinese authorities had implemented a very strict zero-Covid-policy to contain the spread of the virus, which had stifled economic activity, as only a handful of cases could shut entire factories and lockdown neighborhoods. However, the county moved away from these very restrictive measures and the positive impact on the economy is already showing on economic indicators forecasts.

After a sluggish growth of just 3% last year, the People's Republic of China (PRC) set the GDP growth target at around 5% for 2023 [1]. According to its latest forecasts earlier this month, the International Monetary Fund (IMF) maintained its GDP projection at 5.2% - a bigger expansion than the 2.8% projection for the global economy. [2]

The rebound of the world's largest importer of oil, is also expected to push oil demand higher this year. Based on its latest monthly report, OPEC expects demand from China to have increased by 660,000 barrels per day in the first quarter, compared to Q1 2022. [3]

Strong Data

Today's releases show that China's recovery maintains its momentum, with the National Bereau of Statistics (NBS), noting a "good start" in the first quarter [4]. The economy expanded by 4.5% y/y in the first quarter, the strongest growth in a year and a much better performance compared to the previous reading (+2.9%). On a quarterly basis, GDP grew by 2.2%, after having stagnated in the prior quarter.

Industrial production grew by 3.9% y/y in March, which was marginally lower than expected, but marked a significant increase over the previous month (+2.4%). More to it, retail sales jumped 10.6% y/y, from just 3.5% prior, while for the entire quarter they rose 5.8% y/y.

Luxury Brands

Trading updates from luxury fashion brands last week, also highlighted China's comeback. The Asia-Pacific region (excluding Japan) is the biggest revenue generator for Hermes ( The France-based firm saw its sales in the region jumping 22.5% year-over-year in the first quarter to €1.763 billion, driven by "a very good Chinese New Year". [5]

Rival luxury giant LVMH Moët Hennessy Louis Vuitton (, which also derives most of its revenue from the same region (36% in Q1), saw a 14% increase year-over year increase there - rebounding from the 8% decline of the fourth quarter. [6]

More luxury brands will release their quarterly updates soon, with my focus now turning to UK's Burberry ( in around a month, as nearly 50% of its revenue came from Asia-Pacific in FY2022 [7]. Back in January, the firm had announced a 23% decline in comparable sales in Mainland China, "due to COVID-19 related restrictions". [8]

Potential Headwinds

China's reopening is well underway, but there are headwinds. The country relies on oil imports and a tighter market could hinder the economic growth. A series of countries announced additional oil production cuts at the beginning of the month, which bring the OPEC+ reduction plan to over 3.6 million barrels per day (bpd) from May until the end of the year. [9]

The International Energy Agency (IEA) estimated last week that the surprise cuts will push supply down and aggravate an expected oil supply deficit in the second-half of 2023, which "augurs badly for the economic recovery and growth". [10]

Furthermore, despite today's very strong data, some recent indicators create concerns for a potentially sluggish recovery. Factory activity expanded for the first time in month in January and accelarated in February, but lost steam in March, as Manufacturing PMI came in at 51.9, from 52.6 prior. Furthermore, the latest inflation data raised concerns over consumer demand. China's Consumer Price Index (CPI) rose by just 0.7% y/y in March, the smallest increase since September 2021.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.



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