Will China's Dual Circulation Gain Momentum? Retail Sales in January-February Up 33.8% Year-on-Year

Retail Sales Surge After Slow Rebound, Up 6.4% Compared to 2019 Without COVID-19
Chinese Academy of Social Sciences Expects Annual Growth Above 9% This Year

[Asia Economy Beijing=Special Correspondent Jo Young-shin] China's retail sales in January-February surged more than 30% year-on-year, signaling a recovery from the COVID-19 shock.

According to the National Bureau of Statistics of China on the 15th, retail sales in January-February reached 6.9737 trillion yuan (approximately 1,217 trillion KRW), an increase of 33.8% compared to the same period last year. This is 6.4% higher than January-February 2019, when there was no impact from COVID-19. It is evaluated that the domestic market is gaining momentum beyond normalization. The Chinese leadership has announced that from this year, it will promote the dual circulation policy (domestic and export dual circulation) to drive economic revitalization.

[Image source=Yonhap News]

In the first quarter of last year alone, China's growth rate plunged to minus 6.8% due to the shock of the COVID-19 outbreak. However, through comprehensive quarantine and lockdown measures, the spread of COVID-19 was relatively quickly controlled, leading to a 'V'-shaped rebound of 3.2% in the second quarter. Subsequently, the growth rates were 4.9% in the third quarter and 6.5% in the fourth quarter, regaining stability.

However, domestic sales in China did not keep pace with economic growth, indicating that more time is needed for full normalization. The tourism and food service sectors, in particular, failed to gain momentum. In fact, last year, China's industrial production, exports, and fixed asset investment increased by 2.8%, 3.6%, and 2.9% respectively year-on-year, but retail sales alone decreased by 3.9%.

Industrial production also surged 35.1% compared to the same period last year. The growth rate far exceeded market expectations of 32.2%. Compared to January-February 2019, it increased by 16.9%. Due to concerns about a resurgence of COVID-19, the Chinese leadership urged restraint in travel during the Lunar New Year period, which appears to have contributed to the sharp rise in industrial production.

Fixed asset investment, including infrastructure facilities, also rose 35.0% year-on-year to 4.5236 trillion yuan in January-February. Compared to January-February 2019, this is a 3.5% increase.

Based on the January-February figures, China's economy appears to have normalized in production, consumption, and investment. If the current trend continues, China's economic growth rate in the first quarter of this year is expected to increase by more than 15% year-on-year (considering the base effect).

Liang Zhonghua, Chief Analyst at Huaitong Securities, attended the 'Key Keywords of China's Two Sessions' webinar hosted by KOTRA China Regional Headquarters on the 12th, and said, "Although China's economy entered a normalization track last year, the recovery in consumption was relatively sluggish," adding, "This year, many government-level policies supporting consumer behavior are expected to be introduced."

Tang Duoduo, Deputy Director (Deputy Chief) of the Chinese Academy of Social Sciences, diagnosed, "Looking at China's GDP, consumption, and investment graphs from last year, all rebounded, but the speed varies by sector," adding, "The consumption sector is somewhat delayed." He further explained, "The Chinese economy, especially domestically, has some blockages, and the Chinese leadership's idea is to unblock and circulate these areas," and "Anti-China sentiment is also one of the reasons why the Chinese leadership emphasizes consumption." He added that there is an expectation that China's economy could grow to the 9% range this year.

This content was produced with the assistance of AI translation services.