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Asia-Pacific

China: Work Resumption Continues; 2020 GDP of 2.4% expected

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More work resumption in China: According to the National Statistical Bureau, 97.2% of scaled industrial enterprises were in operation on 9 April, +18.9ppts from end-February. Among those in operation, half had productivity of >80% of normal level, and more than 80% had productivity of >50% of normal level. The value-added growth of industries above designated size (an­nual main busi­ness rev­enue of 20 mil­lion yuan or more) rebounded to -1.1% yoy in March, from -25.9% yoy in February. By industries, value added of pharmaceutical manufacturing had the best growth of +10.1% yoy last month while that of furniture manufacturing had the sharpest reduction of -8.1% yoy. Citi analysts expect productivity growth to normalize in 3Q20.

 

 

Government definition of “new infrastructures”: Separately, the National Development and Reform Commission (NDRC) set the definition of “new infrastructures” in China including three aspects, namely “information infrastructure”, “integration of infrastructure” and “innovation infrastructures”, relevant to upgrade the economy and encourage more innovation, particularly in the 5-year period (2021-2025E).

 

The development of these areas could be endorsed by supportive government measures comprising tax and levy concessions, technology sharing with tertiary institutes as well as more flexible and supportive government policies.

 

Investment Strategy: The government’s definition of “new infrastructures” endorsed Citi’s preference for new economy vs. old ones. Amid a volatile market due to impact from COVID-19 and oil price fall, Citi analysts continue to expect Chinese quality names to outperform the market index ahead. Citi analysts prefer sectors such as internet, consumption staples, healthcare, education, infrastructure, and technology.

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This communication is for general information only and should not be relied upon as financial advice. The information herein has no regard to the specific objectives, financial situation and particular needs of any specific person and is not intended to be an exhaustive discussion of the strategies or concepts mentioned herein or tax or legal advice. Any person interested in the strategies or concepts mentioned herein should consult their independent tax, legal, financial or other advisors,
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