INDEPENDENT MARKET RESEARCH 1. CHINA ECONOMIC OVERVIEW China’s GDP expanded by 5.2% year-on-year (“yoy”) in 2023, expanding from the 3.0% growth in 2022; supported by collective growth in the agricultural, industrial, and services sectors. The Manufacturing Purchasing Manager Index recovered to 49.9 in 2023, up from 49.1 in 2022. The Consumer Price Index grew by 0.2% yoy in 20231. China’s economy observed a modest rebound since the lift of its zero-COVID policies in December 2022, but faces ongoing headwinds contributed by a deepened property market downturn and subdued global export demand. The government’s tightening of regulations and borrowing limits for real estate property loans since 2020 placed liquidity and credit stress on heavily leveraged property developers, leading to debt defaults and liquidation risks in even some of the largest property developers in China. High global inflation and interest rates, coupled with China’s trade tensions and diplomatic disputes with major trade partners including the United States and European countries resulted in softened global demand for Chinese goods. To bolster its economy and the property sector, the government has introduced fiscal stimulus and monetary policies to extend support to financial institutions, property developers, and homeowners. Liquidity has been injected into the market since the start of 2023 including cuts in the required reserve ratios and lowered rates on medium-term lending facilities for financial institutions. Loan prime rates have been cut and are on a downward trajectory to ease borrowing costs for businesses and consumers. Tax relief measures were also extended to small businesses, rural households and selected industries to boost confidence in the private sector. Minimum down payment requirements for first-time and second-time homebuyers and rates of existing mortgages for first homes were also reduced in a bid to strengthen homebuyers’ confidence and boost property purchases. The government also approved an additional one trillion-yuan central government bond issuance in October 2023 to provide fiscal support to debt-laden local governments and passed a bill to allow local governments to front load part of their bond quotas for 2024. As the world’s second largest economy, China’s considerable economic strength and domestic fundamentals will continue to have a profound influence on the global economy and support its longer-term growth despite the near-term challenges. For 2024, China has set a GDP growth target of around 5% 2. 2. RETAIL MARKET OVERVIEW3 2.1. CHINA As of 2023, China’s average retail occupancy rate increased by 0.2% to 91.1%. Average nationwide retail rent recorded RMB556.00 per square metre per month (“psm pm”), a decline of 0.4% yoy. China’s total retail sales (excluding motor vehicles) recorded RMB42.3 trillion in 2023, an increase of 7.3% yoy. Jewellery, clothing and textiles, sports and recreational goods, tobacco and liquor, and food and beverage were the largest contributors to retail goods sales value growth, registering a yoy increase of 13.3%, 12.9%, 11.2%, 10.6%, and 8.4% respectively4. On the other hand, building and decoration materials, and cultural and office goods observed a yoy decline of 7.8%, and 6.1% respectively. Online retail sales accounted for 32.7% of the total retail sales in 2023. Retail Trends Retail malls have increasingly evolved from brick-andmortar stores to offering themed, experiential retail to adapt to changing consumer preferences. Landlords have incorporated more entertainment, sports, arts, culture, and recreational elements and spaces to align with consumers’ leisure pursuits today, particularly to attract the youth. Retail offerings and leisure spaces in the outdoors are also increasingly preferred by consumers as a place to unwind and spend their time at. The government has been driving the establishment of “first-store economies” where selected cities will emphasise on introducing “first stores” and flagship stores of domestic and foreign retail brands, to boost consumption and to keep retail offerings innovative. Retail malls will be increasingly competitive in their retail mix and offerings to capture retail footfall and keep up with consumers’ desire for fresh retail experiences. 1 Source (GDP, Manufacturing Purchasing Manager Index, Consumer Price Index): National Bureau of Statistics. 2 Source: Nikkei Asia, China sets GDP growth target of 'around 5%' for 2024, 5 March 2024. 3 The retail supply and demand analysed in this section refers to the shopping mall segment, and retail rents refers to ground-floor shopping mall average rents. 4 Based on the yoy retail sales value growth of 5.2% for “grain, oil, and food” industry, and 3.2% for “beverage” industry in 2023. 64 CAPITALAND CHINA TRUST
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