Interview
Tracking China’s Economic Recovery
- Goldman Sachs China Equity Research deployed a new aggregated demand tracker to address the lag and frequency limitations of official Chinese statistics, aiming to provide real-time, ground-up indicators of consumer and industrial activity during the pandemic recovery.
- The tracker synthesizes 58 weekly data inputs from sector analysts, segmented into:
- 25% upstream data (materials and energy).
- 25% midstream data (industrial and production activities).
- 50% downstream data (consumer demand).
- Recovery trajectories by sector as of late April show:
- Strong recovery: Consumer staples and construction have returned to or exceeded pre-virus activity levels, driven by essential demand and government policy pushes.
- Lagged recovery: Consumer discretionary remains the most delayed sector, averaging 64% of normal levels.
- High variance within discretionary: Auto, major restaurants, and sportswear range between 70%–90%, while air travel and tourism remain severely depressed due to restrictions.
- Weekly trend: The discretionary sector is improving sequentially by a few percentage points per week.
- Aggregate demand averaged 81% of normal levels as of April 24, rebounding from a February low of 50%, though still 10%–20% below January's pre-pandemic baseline of roughly 90%.
- The methodology incorporates non-standard data inputs to ensure accuracy:
- Dealer-level data for auto and appliance sales to lead production metrics.
- "Mid-player" sample companies identified as more sensitive to market shifts than market leaders.
- Alternative cross-verification using chemical and industrial input data to validate final consumer sales figures.
- Investment in "new infrastructure" (5G, AI, industrial IoT, ultra-high voltage, intercity metros) is projected to grow by over 20% this year and 15% in 2021, rising from a current share of less than 10% of total infrastructure spending.
- Goldman Sachs views the shift toward new infrastructure as a structural economic transition that will not only offset near-term slowdowns but also drive future productivity gains.