China’s economy grew at the slowest pace in four decades last year as it was battered by Covid lockdowns and a housing crisis, but forecasts, which beat forecasts, raised hopes of a strong rebound when it reopens.
Beijing’s rigid adherence to its zero-Covid strict containment strategy, which effectively sealed the country off from the world, hammered business activity over the past year and threw supply chains offline, rocking the global economy.
The measures meant growth was just 3 percent last year, the worst since a 1.6 percent drop in 1976 – when Mao Zedong died – excluding the pandemic-hit 2020.
National Bureau of Statistics official Kang Yi told reporters Tuesday the world’s second-largest economy faced “storms and rough waters in the global environment” in 2022.
While the number missed the government’s 5.5 percent target and was well below a year earlier, it was better than the 2.7 percent predicted in an AFP poll of analysts. The figures for the fourth quarter also exceeded forecasts and gave reason for optimism for 2023.
Meanwhile, retail sales fell just 1.8 percent in December, compared to the estimated 9.0 percent, as the lifting of restrictions allowed consumers to return to the high street.
Industrial production and fixed investment also beat expectations, while unemployment fell last month from November.
“The good news is that there are now signs of stabilization as the policy support provided towards the end of 2022 is reflected in the relative resilience of infrastructure investment and credit growth,” said Louise Loo, senior economist at Oxford Economics, in a note.
– ‘Zero-Covid’ scrapped –
China’s economic woes over the past year have sparked repercussions in a global supply chain already grappling with slowing demand caused by rising inflation and central bank rate hikes.
Strict lockdowns, quarantines and mandatory mass testing led to the abrupt closures of manufacturing plants and businesses in key centers – including Zhengzhou, home of the world’s largest iPhone factory.
The story goes on
Beijing abruptly eased pandemic restrictions in December after some of the biggest protests in years, but the move has spiked infections across the country and raised concerns about the short-term impact on the economy.
The World Bank forecasts that China’s GDP will increase to 4.3 percent in 2023 – still below expectations.
Problems in the real estate industry also continue to weigh on growth.
The sector, which together with construction accounts for more than a quarter of China’s GDP, has been hit hard since Beijing began cracking down on excessive borrowing and rampant speculation in 2020.
The tightening of regulations marked the beginning of financial worries for Evergrande, the former Chinese number one property giant, which is now struggling with a mountain of debt.
Since then, property sales have fallen in many cities and many developers are struggling to survive.
But the government appears to be taking a more forgiving approach to revitalizing the sector.
Measures to promote “stable and healthy” development were announced in November, including loan support for indebted developers and support for deferred payment loans for homebuyers.
Jing Liu, chief economist for Greater China at HSBC, said the “normalization path is likely to be bumpy” and warned of a “major setback in the near future” followed by a strong recovery.
“The introduction of a number of measures to ensure sufficient financial support for developers and stimulate housing demand will also help stabilize the real estate sector,” she said.
And Chaoping Zhu of JP Morgan Asset Management expressed optimism, saying in a note: “Looking ahead, due to reopening and policy stimulus, we expect sustained economic recovery in 2023.”
“The service sector should be the early beneficiary as pent-up demand resolves.”
sbr-is/dan
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