INVESTMENT OUTLOOK FOR 2023 - 9 - China The two factors that were dragging on Chinese growth in 2022 — its zero-Covid policies and an unsteady property market — should moderate in 2023, allowing the economy to rebound, though growth will likely remain below pre-pandemic levels. Covid infections in China have spiked again. Nevertheless, the government has reiterated its commitment to ZCP. At the same time, work on an mRNA vaccine is progressing and it should eventually be rolled out. We now know from experience that economic activity can rebound quickly once restrictions are lifted. The problems in the property market will likely take longer to address. The recent Communist Party Congress signalled there would be longer-term policies to develop a housing system that ensures supply from multiple sources and the development of both rental and property sales markets. In the near term, the government is looking to targeted policies to support the recovery of the sector. President Xi’s Party Congress speech was also notable for its emphasis on speeding up the transition to green development and meeting carbon emissions goals. This should be another source of long-term demand for companies in the relevant industries. A key distinction between China and the US and Europe is the scope the government has to stimulate the economy, through either fiscal or monetary measures. While core inflation is at over 4% in the eurozone and over 6% in the US, in China, it is at just 0.4% (see Exhibit 3).2 2. As of November 2022 Exhibit 3: Core inflation in China far lower than in the US or eurozone Core CPI, year-on-year change 7 6.6 6 5 4.7 4 3 2 1 0.4 0 China Eurozone US core CPI Data as at Sept. 2022. Sources: Haver, BNP Paribas Asset Management.