Despite a thriving domestic economy, exports continue to remain fragile in China.

China’s domestic economy is showing promising signs of recovery, evidenced by the 18.9% year-on-year increase in retail and restaurant sales during Golden Week in May. Catering sales alone saw a 57.9% YoY growth, with restaurant food and beverage sales surging by 92% over the first three days of the holiday compared to 2019 levels. Domestic tourism also saw a significant boost with the number of tourists during Golden Week reaching 274 million, a 40% increase compared to the same period in 2019, and generated revenue of 148 billion yuan, a 25% increase YoY. However, outbound tourism did not recover, with only 1.253 million trips per day during the holiday, representing a 59.2% decline compared to 2019.

The domestic recovery could become more obvious during the summer holidays, as there will be less consumption spilled to outbound tourists. The global economic outlook remains sluggish, with the US economy expected to slow further, negatively impacting Chinese exporters. Therefore, the government may use fiscal stimulus to support manufacturing and stabilize labor demand in the sector as a policy tool. The revised GDP forecast predicts growth to increase from 5.0% to 5.7% by 2023, although the harsh global economic environment in 2024 may cause it to decrease to 4.7%, down from the original forecast of 5.3%.

It is important to note that the publication, prepared by ING, is for informational purposes only and should not be considered investment advice or a solicitation to buy or sell any investment.

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