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China: Persistent pessimism

The post-Covid recovery in China’s economic activity was not as strong as expected in 2023. The property sector crisis deepened further at the end of the year, the demand for housing did not pick up again, and weak household confidence continues to weigh on household consumption. Conversely, the export-oriented manufacturing sector performed better than expected in the last quarter, in contrast with the performances of domestically oriented sectors. The authorities are maintaining an accommodative policy. However, the weak financial situation of local governments is constraining public investment, and the People’s Bank Of China has little room for manoeuvre to revive credit growth. The banking sector is facing an increase in credit risk, but this is seemingly still under control.

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