China"simportanceforGermanyhasgrownovertheyears.TheEuropeanUnion"sexportstoChinaaremuchlargerthantheUnitedStates"exportstoChina,bothinabsoluteandrelativeterms.WithintheEU,GermanymakesupalmosthalfoftheEU"sexportstoChina.Germany"sexportexposuretoChinaisabouttwotimeshigherthantheEU"saveragewhencomparedbyGDPandalmostfivetimeshigherthantheUS"(accordingto2022data).

TheEUeconomyisevenmoredependentonChinawhenitcomestoimports.In2022,importsfromChinaaccountedfor4percentoftheEU"sGDP,whileonly2percentofUSimportscamefromChina.

BusinesswithChinacontributedabout15percenttoDAX40companies"earningsand9percenttoEUROSTOXX50companies".Germany"sautoindustry,inparticular,dependsonChineseexports(25percentearningsexposure),withthesemiconductorandchemicalsindustriesrelyingheavilyonbusinesswithChinaaswell.

(资料图片)

Whileautoandluxuryarethemostexposedsectorsinthesample,weexpectourpreferredsectors—travelandleisure,chemicalsandbasicresources—tobenefitmostfromChina"seconomicrecovery.

ChemicalsareamongthetoptradedgoodsbetweentheEUandChinaandrepresentedabout8percentoftheEU"sexportstoChinalastyear.AnalystshavereviseddownearningsestimatesforthesectordespitegrowingdemandfromChinaandfallingenergycosts.Wereiterateouroverweightstance.

Chinaaccountsforabout15percentofearningsfromDAXandEUROSTOXX50chemicalscompanies.

TheBloombergIndustrialMetalsIndexisupabout11percentsinceOctober2022,butremainsbelowitsMarch2022peak.SoimprovingdemandfromChinesemanufacturing,renewableenergyprojectsandthepropertysectorshouldstimulatethedemandformetals,withlowerenergypricesandlowleveragelevelsprovidingadditionalsupporttothesector.

We(DeutscheBank)expectastrongreboundintourismdemandfromChinaashouseholdsavingshaveaccumulatedduringtheCOVID-19pandemicandChinesetravelersarewillingtospendmoreontourismservices.Asaresult,theEUshouldbenefitstronglyfromChinesetourismdemand:beforethepandemic,Chinesetouristsaccountedfor10percentofnon-EuropeantravelerstotheEUandspentalmost€10billion($10.92billion)ontripstotheEUin2019.

Themanufacturingandservicessectorsrecoveredsimultaneously,andbothareshowingstronggrowth(withpurchasingmanagersindexaround10-yearhighs).Andpositivesignsareemergingfromthepropertysector,reflectedbystrongersalesandhigherprices.

Fromanearningsperspective,thestronger-than-expectedgrowthinChinaispartiallycompensatingweakgrowthinEurope.Consensusfirstquarter2023earningsestimatesfortheSTOXXEurope600havebeenreviseddownto-5percent(year-on-year).Earningsestimatesnowlookmorerealistic,andtheyshouldallowforpositivesurprisesintheupcomingreportingseason.

Also,theservicessectorisrecoveringslightlyfasterthanthemanufacturingsector,andtravelanddiningservicesareparticularlystrong.Atthesametime,thereisnodeclineingoodsspending.Infact,Chineseconsumersarespendingmoreonclothing,jewelryandevenfurniture.Theonlysectorshowingweaknessisconsumerdurables,especiallycarsandmobilephones.

Giventhattheeconomicrecoveryhasjustbegun,consumerconfidencemightnotyetbehighenoughforconsumerstospendtheirmoneyondurablegoods,andwhileautomobileisthesectorwiththestrongestearningsexposuretoChina,wecurrentlydonotseeastrongpositiveimpulseonearnings.

Domestictravelisonlythefirststepoftherecovery.Giventhatinternationaltravelwillrequiremuchmoreplanningahead,andconsideringthatairlinesstillneedtobuildupcapacity,westillneedsomepatienceforinternationaltraveltoreturntothepre-pandemiclevel.

Besides,thefirstevidencefromHongKongisshowingastronginflowofChinesemainlandtravelers,whiletraveltotherestofAsiaandEurope/theUnitedStatesshouldalsobeginreboundingsoonandhopefullynormalizingbythesecondhalfofthisyearorbyearly2024.

Wereiterateouroverweightintravelandleisure.Lowerenergycosts,limitedcapacityandhighpost-pandemicdemandfromEuropeandtheUShavealreadyprovidedtailwindstothesector.AfterthreeyearsoftravelrestrictionsinChina,anda20trillionyuan($2.90trillion)increaseinhouseholddeposits,weexpectastrongpushfordemand.

Furthermore,investmentinrenewableenergyisoneofthegovernment"sprioritiesforthemediumtolongterm(withthegoaltorealizecarbonneutralitybefore2060).Investmentsintheenergygenerationandsupplysectorsincreasedby30percentyear-on-yearin2022,withmorethan40percentofnewpowergenerationcapacitycomingfromsolar,and20percentfromwindenergy.

Wereiterateouroverweightinmetalsandminingduetolowleverage,lowerenergycostsandgrowingdemandfromChina,andwehaverecentlyincreasedourcopperpriceforecast.

Wagegrowthhasbeensubduedoverthelastfewyears,anditwillstilltakesometimeforlabormarketstotightenagain.Inaddition,Chinahasbeenlargelyshelteredfromhigherenergyprices,asthecountrydoesnotrelymuchonnaturalgasandcrudeoil,insteadusingcoalasthemajorenergysource,eventhoughthemajorityofnewpowersupplyiscomingfromrenewables.

WiththereopeningoftheChineseeconomy,inflationcouldpickupslightlyinthesecondhalf,potentiallyapproaching3percent.However,weexpectcoreinflationtoremainmoderate,andoverall,inflationtonotbeabigconcernfortheChineseeconomy.ThePeople"sBankofChina"scurrentfocusisoneconomicgrowth,andassuch,thereisnorealneedtotightenmonetaryorfiscalpolicy.Andwedonotexpectachangeinthemonetarypolicyrate.

XiongYiischiefChinaeconomist,andMaximilianUleerisheadofEuropeanEquitiesandCross-AssetStrategyatDeutscheBank.