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In terms of foreign trade, although exports played a significant role in driving China's economic growth in 2022, facing the global economy downturn in 2023, accompanied by trade decoupling and industrial chain shift, the external demand will continue tofalter and exports are likely to drag down China nominal GDP in 2023.在对外贸易方面，尽管出口对2022年中国经济增速的拉动作用明显，2023年，全球经济已进入下行周期，同时叠加贸易脱钩和产业链转移，外需会持续减弱。出口会对中国2023年的经济增速带来大约0.5百分点的拖累。

The structural divergence between different regions reflects local governments' estimate on the macro trend this year. According to the work reports released by the 31 provinces before the Two Sessions in March, most remain conservative expectations on 2023 economic growth and the weighted average GDP target is merely 5.6%. Hainan expected the highest growth, while Jiangsu and Qinghai expected the lowest. Zhejiang, Jiangsu, Guangdong and Shandong, the four major foreign trade provinces, all had lowered their GDP targets compared to 2022.不同地区之间的结构性分化能够反映出各地政府对今年宏观趋势的判断。截至春节前，从31个省市地方两会已发布工作报告来看，大部分对于2023年的经济增长预期不高：GDP增速目标的加权平均值仅5.6%。其中增长最高的是海南，而江苏、青海最低。浙江、江苏、广东和山东这四个对外贸易大省的GDP目标都比2022年有所下调。

In the face of rising savings rate, downward trend of consumption and external demand, the government work report of 2023 Two Sessions proposed to focus on expanding domestic demand and give priority to the economic recovery and boost consumption. Centering on this theme, a series of economic stimulus plans and policies will be introduced to form a strong domestic market, promote innovative development of foreign trade, intensify efforts to attract and utilize foreign investment, promote high-quality development of free trade zones, optimize layout of regional opening-up, raise the level of outbound investment and economic cooperation. The overall message of the Two Sessions is to avoid over-stimulating the economy and to restructure the government for long-term development. 面对升高的储蓄率以及下行的消费和外需趋势，2023年两会政府工作报告提出要着力扩大国内需求，把恢复和扩大消费摆在优先位置。2023年国家的总基调是：重启经济，拉动消费。围绕这一基调，将会推出一系列的经济刺激计划及政策，以促进形成强大的国内市场、推进对外贸易创新发展、加大力度吸引和利用外资、推动自贸区港高质量发展、优化区域开放布局、提升对外投资和经济合作水平。两会的总体信息是避免过度刺激经济，并为长远发展调整政府结构。

03

According to the economic data(industrial added value, fixed asset investment and total retail sales of consumer goods) of the first two months of 2023 released by National Bureau of Statistics on March 15, the overall economic operation shows a trend of stabilization and recovery, which is reflected in: 根据国家统计局3月15日发布的今年前两月工业增加值、固定资产投资及社会消费品零售总额等经济数据来看，随着疫情防控较快平稳，经济运行整体呈现企稳回升的态势，表现在：

First, production demand is picking up in both the industrial and service sectors, leading to improved consumption and investment demand. The total retail sales of consumer goods in the January-February period increased by 3.5% year on year(YoY), while investment increased by 5.5% YoY.一是生产需求回升向好，工业和服务业双双回升，带动消费和投资需求都在改善。1-2月份社会消费品零售总额同比增长3.5%，投资同比增长5.5%。

Second, employment and prices in January-February were generally stable. The surveyed urban unemployment rate was 5.6% on average. The consumer price index (CPI) rose by 1.5% YoY. Among the world's major economies, China is with generally stable prices in sharp contrast to high global inflation. 二是就业物价总体稳定，1-2月份全国城镇调查失业率平均为5.6%，总体稳定。1-2月份居民消费价格同比上涨1.5%，中国在世界主要经济体当中，价格保持总体稳定，和国际高通胀形成鲜明对比。

Third, the economic cycle is gradually improved. In addition to the accelerated growth of the production and consumption end, some indicators of transportation show that the freight volume increased in the first two months, and the passenger volume of railway and air also showed a substantial growth. 三是经济循环逐步改善，除生产端、消费端增速在加快以外，从交通运输的一些指标来看，前2个月货运量增长，铁路、航空客运量也都出现了大幅增长。

Fourth, the vitality of market entities has increased. In February, the PMI of the manufacturing sector rose to 52.6%. Meanwhile, the PMI of the service sector also reached a recent high of 55.6%. In particular, the output added value of SMEs increased by 2.4% YoY, the growth is faster than that of large enterprises. It shows that expectations for market development have improved, the vitality of businesses and the market has gradually increased. 四是市场主体活力趋于增强， 2月份制造业PMI已经回升到52.6%，同时，服务业PMI也达到了近期高点55.6%，特别是小微企业的生产增加值同比增长2.4%，这个速度快于大型企业，表明市场发展预期改善，企业和市场活力逐步增强。

The economic target, GDP growth of 5% by 2023 announced during the Two Sessions, is a lower-than-expected but more achievable target and more sustainable for long-term growth. The economy of China is still in the initial stage of recovery with some prominent long term internal structural problems and the global environment remains complex. However, Citibank economists believe that geopolitics impact on markets will be relatively little for now due to the strong recovery potential of China's economy. According to J.P. Morgan, consumption will contribute 4.1% to the economy in 2023, while investment will contribute 2%, providing more support to GDP growth for the whole year. Looking to the future, the survey results of various institutions show optimism and confidence on China's future economic development and consumption willingness. They believe what drives China's growth recovery in 2023 is likely to depend more on a recovery in the consumer sector and the strength of infrastructure investment spending, China is still a favored place for investment. 两会公布的经济目标，GDP在2023年增长5%，这是一个低于预期但更容易实现的目标，对于长期增长来说更具可持续性。从国内来看，一些长期积累的结构性问题突出，目前经济仍然处在初步恢复阶段，而国际环境依然复杂，世界经济增长趋于放缓，主要经济体面临通胀问题，中美摩擦等战略竞争将持续多年。然而，花旗银行认为，因为中国经济有强劲的复苏潜力，现在地缘政治对市场的影响相对较小。2023年推动中国经济增长复苏的抓手可能更多依赖于消费领域的恢复以及基建投资支出的强度。根据摩根大通预计，2023年消费对经济的贡献将达到4.1％，投资为2％，能够为拉动全年GDP增长提供更多助力。展望未来，各机构的调研结果表明对中国的未来经济发展和消费意愿持乐观态度及信心，认为中国仍然是一个投资的热土。

With the further opening-up of pandemic control and policy stimulus, market confidence will gradually return, asset allocation behavior will change with the excess deposits flow to businesses, stock markets, real estate, wealth management and other assets. Thus, further drive the employment of the industry and recovery of the economy. In the "expansion of consumption" segmentations, research shows that consumption sectors most restricted by the pandemic, such as tourism and entertainment, will have the greatest room for recovery. The China Tourism Academy estimates that domestic tourism of 2023 is expected to recover to 71% and the number of inbound and outbound tourists is expected to recover to 31.5 % of the pre-pandemic level. 随着疫情防控进一步开放和政策刺激力度的加大，经济向好，市场信心逐渐回归，资产配置行为将会发生变化，超额存款将向企业、股市、地产、理财等各类资产流动，带动行业的就业趋于好转，从而促进经济进一步的恢复。在“扩消费”细分领域中，调查表明，旅游和娱乐等最受疫情限制的消费领域拥有最大的回升空间，文化旅游市场融合发展将释放消费潜力。中国旅游研究院预计，今年国内旅游有望恢复至2019年疫情前的71%；全年入出境旅游游客人数有望恢复至疫情前的31.5%。

04

China markets start 2023 with a bang as policy shift hastens. For brands, the three months around the Chinese Spring Festival are generally a consumptionoff-season. For investors, China's economic indicators are expected to rise in the second quarter. New deposits in March merely increased by 200 billion yuan, the lowest since the past year, indicating a turning point in household consumption has appeared. March credit data showed that M2 growth and social finance growth both increased, which also signaled a good recovery momentum (Source: Wind, CICC).随着政策转变加快，中国股市迎来了2023年的大爆炸，对品牌而言，春节前后三个月属于传统消费淡季，对于投资者而言，预计第二季度中国经济指标将上行。3月份新增存款仅增加了2000亿，创过去一年以来新低，居民消费拐点已经出现。而中金公司研究部3月信贷数据显示M2增速与社融增速均上升也释放了回升态势良好信号 (资料来源：Wind)。

Investment strategies are suggested to focus on the theme of economic recovery and those verified with the first quarter forecast, such as the large consumer, technology sectors. In addition to identify specific investment opportunities in sustainable development areas such as the digital economy, advanced manufacturing, medical innovation, and renewable energy that are expected to be promising in the future, it’s also important to have a globally diversified portfolio of investments in high-quality, non-cyclical sectors with big potential of increased earnings and valuations. 我们建议投资策略聚焦受益于经济复苏回升主题和一季报预期景气验证题材，战略性布局大消费、科技等板块里的价值股。在预计未来前景可期的数字经济、制造升级、医疗创新及新能源等可持续发展等领域辨别确切的投资机会。建立全球多元化的投资组合，投资于高质量、非周期性、并有潜力增加收益和估值的行业。

According to McKinsey's 2023 report, five trends are reshaping the Chinese market “1) the rising middle class, 2) premiumization maintains momentum, 3) smarter choices instead of trading down, 4) it’s all about the product, and 5) local companies are winning” will have a profound impact on many fast-moving consumer goods companies, including apparel, cosmetics, and food. For increasingly rational consumers, it’s critical for brands understand local consumers’ purchasing behavior, consumption pattern and leisure habits, as well as their attitude towards life, success, wealth and health, thus to provide added value and better experience. 根据麦肯锡2023年报告总结中国市场的1）中产阶级继续壮大，2）高端化势头，3）选择更明智，消费未降级，4）产品为王，5）本土企业正在赢得市场等五大消费趋势将对服装、化妆品以及食品等诸多快消品类公司影响深远。对于越来越理智的消费者，品牌应该更多的去了解消费者的购买行为、消费模式和休闲习惯的主要走向，以及对生活、成功、财富和健康的态度。挖掘兴趣消费，在功能的基础上为消费者提供附加值。想要用户有更好的消费体验，品牌需要打造更加精细化、差异化、高质量的产品满足不同细分领域的消费者需求。

As the global economy transitions to a low-carbon future, and green lifestyle is increasingly integrated to awareness of consumers. It is in the best interests of companies integrate green development into their corporate and marketing strategies to gain the recognition of consumers. Planning on the industrial chain cluster of durable consumer goods in line with the direction of future industrial changes will take the lead in global competition.当下，绿色低碳成为共同追求，绿色生活方式渐入人心，企业应将绿色发展融入企业战略，在营销时，突出绿色和可持续发展的概念，获得消费者的认同。企业布局符合未来产业变革方向的耐用消费品的产业链集群，就会在国际竞争中走在前列。

At the same time, compared with the traditional business model in China market, the channels of communication to users have undergone upgrading and dramatic changes during the pandemic. Redesign the models of how to effectively reach users has become a top strategic priority to win the Chinese market with more than 400 million middle class consumers. For multinational companies, continuously develop customized products, getting close to Chinese consumers, and finance their high R&D with big sales in China market is one of the primary considerations to maintain global competitiveness. 同时，由于链接模式、渠道、产品传达用户、购买及复购等方式相较传统模式在疫情期间已经发生了升级迭代的变化。品牌布局新媒体、数字化新模式，重塑交易结构、社群链路等；不断提升内容设计、运营设计能力、思考如何有效触达用户，已成为赢得这个拥有4亿多中产阶级消费者、增长潜力巨大的中国市场战略重中之重。对跨国企业而言，通过占领中国市场持续不断的研发适合中国消费者偏好的产品、贴近中国消费者，以中国销售为其高额研发融资，则是维系全球竞争力的首要考量之一。

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