january: slow bounce into 2023

Shanghai, Hongqiao Station 13 January 2023

Moving into February 2023, talk of an economic rebound is hot, the continuing COVID crisis notwithstanding. Spending data over the Spring Festival break promise recovery from 2022 yet remain below pre-COVID levels. To engineer a fillip, mortgage rates will be allowed to stay below the nationally set floor. This holdover from 2022 hints at further financial easing. Yet for all the fervent hope of a robust economy in 2023, GDP targets in 23 provinces are lower now than at their 2022 provincial Two Sessions; most set goals of 5.5 to 6.5 percent growth. 

The three-year SOE action plan concluded in December 2022 with SASAC (State-owned Assets Supervision and Administration Commission) calling for realising 'world-class enterprises' in the next phase. SOEs are on notice to act in the interest of the state and to stabilise the struggling economy post-COVID.

‘Self-reliance’ remains dominant in trade policy and legislation despite US chip bans and post-COVID recovery: it was reiterated by Xi at the 31 January Politburo study meeting. The ‘70 percent self-sufficiency by 2025’ goal for chip manufacturing (just 16.7 percent in 2021) remains in play. Carbon-reducing tech sees a potential Q1 boom, not least in NEVs, with the PRC’s 60 percent global market share holding up. As its auto exports grow rapidly, poor transport capacity, instability, and expensive freight threaten it in the longer term. 

The BRI’s 10th anniversary heralds a growing focus on building bilateral and multilateral trade agreements—visible in Beijing’s aspirations to join such agreements as CPTPP (Comprehensive and Progressive Trans-Pacific Partnership Agreement) and DEPA (Digital Economy Partnership Agreement). The PRC continues to extend trade with RCEP (Regional Comprehensive Economic Partnership) countries as the mega trade pact marks its 1st anniversary.

2022 grain imports fell over 10 percent y-o-y, led by a near 6 percent decline in soybeans. But this is by no means reassuring in food security terms: structural shortages in feed grains are unlikely to be overcome in the near future, despite the drop in imports last year. A rebounding pig population expected in 2023 presages higher demand for corn and soybeans and substitutes as well. Changes to regulation have paved the way for importing Brazilian corn as an alternative to US or Ukrainian grain. The first shipment has arrived with the total projected to hit 5 million in 2023.

‘Rule of law’ in relation to foreign interests was highlighted at the last National People's Congress Standing Committee session in 2022. Three bills to shore up the PRC's global position and withstand competition were submitted

  • international: Beijing signals shifting from ‘absolute’ to ‘restrictive’ doctrine regarding state immunity 
  • domestic: rules for foreign relations are to be clarified, and counterespionage strengthened

The National Energy Work Conference, held 30 December 2022, set the agenda for the coming year. 

  • coal’s primary role in firming up power supplies and prices was highlighted, in addition to with calls for increased oil and gas outputs
  • for renewables, rough capacity expansion targets were set for wind (+60 GW (gigawatts) in 2023), solar (+100 GW), hydro (+10 GW) and nuclear (+2 GW) 

NBS power statistics for 2022 showed a marked decline in the growth of power consumption in secondary industries (up only 1.2 percent y-o-y), including manufacturing and supply of electricity, due to COVID and realestate crises.

Unsurprisingly, overall emissions in 2022 were steady, with domestic oil and gas consumption falling for the first time in decades, according to the International Energy Agency. This was helped by strong growth in renewable power generation capacity, with y-o-y increases for hydro (5.8 percent), wind (11.2) and solar (28.1).

PRC industries are feeling pressure from US chip bans, prompting a boom in domestic market investment amid growing space for local chip manufacturers. Despite the ban on ASML equipment, two chip makers finagled access to its lithography tech. One expert called for ’PRC denial of demand’ in retaliation for ’US denial of supply’ in high-end chipsA further US ban on exported PRC products and technology is feared.

Demand for higher-quality batteries will support growth, hopes the PRC power battery industry. Yet overcapacity remains a concern: demand in 2025 is forecast at 1,000-1,200 GWh, 25 percent of planned industry capacity of 4,800 GWh.

To keep COVID treatment affordable, new centralised procurement rules issued 6 January urge pharma costs, not least for R&D, to be set using benchmarks. In addition, with infection waves threatened ahead of the Spring Festival break, interim measures emerged to step up basic insurance coverage for COVID sufferers.

Updated on 18 January, the National Reimbursable Drug List placed 111 medicines under public health insurance. The in-demand COVID antiviral Paxlovid was, however, off the list, negotiations with Pfizer having failed.

The PRC population dramatically (though not unexpectedly) shrank by 850,000 in 2022, confirmed the National Bureau of Statistics on 17 January, the first decline in over six decades. Healthcare and pensions are under mounting pressure; systemic revamps are called for to meet the demands of a rapidly ageing society.

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