Our chart of the week shows that activity in Chinese services has snapped back in recent months as the zero-Covid grip on the economy has eased. This trend likely will strengthen in coming months, and it is now part of a larger shift in the political priorities at the top of the Communist Party. China’s key policymakers have signalled that boosting domestic demand through higher consumption is now the main economic policy objective for this year.
President Xi Jinping’s comments late last year to the Central Economic Work Conference were republished last week in the party magazine Qiushi. They emphasize that with growth slowing in China’s main trading partners, the economy must now be reoriented towards consumption. This should be done via the promotion of consumer credit, especially for low-to-medium income households. Banks are starting to respond, but we see little in the way of a boom in the numbers, yet. Consumer confidence has rebounded, but purchasing intentions remain subdued. Similarly, the level of activity in tourism and property sales, key proxies for Chinese consumer health, also remain soft, so the upside potential is significant.
Duncan Wrigley, Chief China+ Economist
