China's Economy Surges in January-February... Noticeable Increase in 'Geum' Investment

Industrial Production, Retail Sales, and Infrastructure Increase by 7.5%, 6.7%, and 12.2% Respectively
Gold Spending in Retail Sales Surges 19.5%... Funds Seem to Flow into Safe Assets

[Asia Economy Beijing=Special Correspondent Jo Young-shin] China's industrial production, initially expected to be sluggish, has greatly exceeded forecasts. Retail sales also rebounded significantly, creating an atmosphere where domestic consumption in China, which had been stagnant, is regaining momentum.

Photo by China National Bureau of Statistics (captured)

On the 15th, the National Bureau of Statistics of China announced that industrial production from January to February increased by 7.5% compared to the same period last year. This figure far surpasses the market expectation of 3.9%. Industrial production is a leading indicator of Gross Domestic Product (GDP).

Fixed asset investment, which combines public infrastructure facility investment and private enterprise facility investment, also improved significantly. The fixed asset investment growth rate from January to February was 12.2%, greatly exceeding the 4.9% level recorded from January to December last year. Although China's monthly fixed asset investment growth rate rose to 35.0% in January to February last year due to the base effect, it had been on a continuous decline since then.

Considering that the Chinese government encouraged local governments to issue bonds for infrastructure investment immediately after the Central Economic Work Conference in November last year, the significant increase in fixed asset investment appears to be a result of this. The amount of local bonds issued in December last year alone reached 1.7898 trillion yuan.

Real estate development investment, which had been stagnant due to government regulations, also turned to an upward trend. The National Bureau of Statistics stated that real estate development investment from January to February totaled 1.4499 trillion yuan, a 3.7% increase compared to the same period last year. The bureau added that the amount related to housing and residential properties within the investment was 1.0769 trillion yuan.

Photo by China National Bureau of Statistics (captured)

Retail sales, a gauge of domestic consumption vitality, also improved significantly. The total retail sales from January to February reached 7.4426 trillion yuan, a 6.7% increase compared to the same period last year. Excluding automobiles, which require large sums of money, retail sales amounted to 6.7305 trillion yuan, a 7.0% increase year-on-year.

Among major consumer goods, a notable item was jewelry such as gold. Sales of jewelry including gold and silver from January to February totaled 63.9 billion yuan (12.42 trillion won), soaring 19.5% compared to the same period last year. Excluding petroleum and related products (25.6%), which saw a sharp price increase due to the surge in international raw material prices, this was the highest growth rate. It is estimated that spending on jewelry such as gold increased for investment purposes as international gold prices rose.

In fact, earlier this year, the China Gold Association announced that China's gold consumption last year reached 1,120.90 tons, a 36.53% increase compared to the previous year. This figure is also 11.78% higher than in 2019, before the outbreak of COVID-19. By sector, gold jewelry consumption increased by 44.99% to 711.29 tons, and gold bars (including gold coins) rose by 26.87% to 312.86 tons.

The National Bureau of Statistics evaluated, "The national economy recovery from January to February was better than expected," and explained, "Despite facing various challenges such as the international environment and domestic COVID-19 outbreaks, we maintained a priority on stability and achieved new progress."

Meanwhile, the People's Bank of China, the country's central bank, maintained the Medium-term Lending Facility (MLF) rate at 2.85% (one-year maturity), contrary to expectations of a rate cut on the same day. The MLF is a policy tool used by the People's Bank of China to supply funds to the market and adjust liquidity and interest rates. A lower MLF rate reduces the cost of loans for banks.

Although there was a prevailing expectation within China that financial authorities would proactively respond to the unforeseen variable of Russia's invasion of Ukraine and the nationwide spread of COVID-19, the People's Bank of China did not take out the rate cut card.

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