SINGAPORE (ICIS) – China has set its economic growth target at around 5% for 2023, a conservative figure underscoring an overall cautious outlook that sent crude oil prices tumbling on Monday after recent strong gains, while Chinese petrochemicals futures markets were broadly mixed .
- GDP growth target lower than 5.5% for 2022
- No major stimulus measures
- On-demand recovery may take some time
At the start of China’s National People’s Congress (NPC) on March 5 in Beijing, Chinese premiere chief Li Keqiang announced the GDP growth target will be below last year’s target of around 5.5%, although the figure shows an acceleration from actual recorded growth of 3.0% in 2022.
At midday, Brent crude fell 63 cents to $85.20/bbl, while US crude fell 60 cents to $79.08/bbl.
For the past four straight sessions, crude oil prices had rallied on hopes of a strong recovery in demand in the world’s second largest economy following the release of its robust February manufacturing data.
China’s parliament will meet for 10 days to outline the country’s overall goals and plans for 2023.
Economists said the GDP target is realistic as the economy has recovered from the severe impact of COVID-19 over the past three years.
“A growth of 5% for 2023 is achievable and corresponds to the current potential. It also gives authorities more room to focus on long-term strategies,” said Shao Yu, chief economist at Shanghai-based brokerage firm Orient Securities.
“Despite the COVID disruptions, China still recorded an average growth of 4.5% in 2020-2022, far ahead of the global average of 1.8%,” he said.
Without major economic stimulus, there is little immediate recovery for commodities.
Prices in China’s petrochemical futures markets were mixed on Monday as players digest the fallout from the government’s announcements.
| CNY/ton | March 6 (03:30 GMT) | % change from Mar 3 |
|
styrene |
8,527 |
-0.1% |
|
Monoethylene Glycol (MEG) |
4,262 |
-1.4% |
|
Linear Low Density Polyethylene (LLDPE) |
8,324 |
-0.3% |
|
Polypropylene (PP) |
7,891 |
0.2% |
|
Polyvinyl chloride (PVC) |
6,414 |
0.1% |
|
methanol |
2,597 |
0.1% |
|
Purified Terephthalic Acid (PTA) |
5,744 |
-0.1% |
Sources: Dalian Commodity Exchange, Zhengzhou Commodity Exchange
Downstream demand recovery is still slow, worrying petrochemical market participants, although there have been clear signs of economic improvement.
Following China’s reopening in December last year, manufacturing, hospitality and tourism saw a strong rebound in demand.
In February, the official manufacturing purchasing managers’ index (PMI) rose to 52.6, up from 50.1 in January and the highest level since April 2012.
However, restoring market confidence may take some time.
“Accelerating GDP growth will fuel the end-consumer recovery and support our forecast of [a] 6% growth in demand for Polypropylene (PP) this year. However, the recovery in the real estate and export sectors remains slow, which will weigh on the pace of PP demand’s return,” said ICIS analyst Joey Zhou.
The PP market is also facing the problem of oversupply due to high capacity, she added.
ICIS analyst Amy Yu estimates that demand for polyethylene (PE) will grow by 4.9% in 2023.
“With COVID restrictions now fully lifted and residents returning to normal life and work, retail market vitality is resuming and demand for PE for some rigid applications in the food and beverage industry and for daily necessities will increase,” she said, adding that the announced GDP target was in line with expectations.
“Consumer behavior is also changing, and household products such as sports equipment, pharmaceuticals and smart home devices show only an upward trend, so the demand for catering and accommodation. All of this will boost PE demand,” she also noted.
Focus article by Fanny Zhang
($1 = CNY6.91)
Thumbnail: Chinese Premier Li Keqiang, right, walks next to Chinese President Xi Jinping during the opening session of the National People’s Congress (NPC) of China at the Great Hall of the People in Beijing, China, March 5, 2023 (by Ng Han Guan/` /Shutterstock)
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