Chinese economic growth of 3% last year is the worst performance since 1976, if we exclude the first year of the COVID-19 pandemic (2020), the performance is well below the goal of the party and the government of the PRC (5.5%), said the head of macroeconomic analysis FG “Finam” Olga Belenkaya “Izvestia” January 17.
The National Bureau of Statistics of the People’s Republic of China published a report on its website on Tuesday, according to preliminary estimates, in 2022, China’s gross domestic product (GDP) amounted to about 121.021 trillion yuan (about $18 trillion), an increase of 3% in annual terms.
“This was the result of several problems, first of all, the zero tolerance policy for covid, due to which the Chinese authorities regularly introduced lockdowns affecting production, logistics, and also significantly restricting the mobility of the population. The result was a reduction in domestic consumption, a slowdown in production growth, and social protests,” Belenkaya explained.
The second major problem she called the ongoing decline in the real estate market.
In addition, according to her, by the end of 2022, the country’s foreign trade indicators also worsened – the decline in exports and imports was a record since 2020, which was facilitated by both the weakening of China’s domestic economic activity due to the consequences of the coronavirus and measures to contain it, and the reduction demand from the US and EU countries, where the economy was slowing down amid high inflation and tighter monetary policy of central banks.
As the expert recalled, since December last year, China began to quickly cancel anti-COVID restrictions and continued this line in early January 2023. In particular, rules regarding quarantine, movement of people, lockdown and testing have been relaxed; borders are open, she said.
“The operational indicators of population mobility showed a rapid recovery. This contributed to an upward revision of forecasts for this year – on the growth of the Chinese economy, on the demand for raw materials, on the general situation in the global economy. That is, there is hope that the growth of the Chinese economy will accelerate and absorb at least partially the negative impact of stagnation or recession in the economies of the US, the eurozone, and the UK,” Belenkaya added.
At the same time, with the lifting of restrictions in China, the epidemiological situation worsened. The analyst noted that in the near future China will celebrate the New Year according to the lunar calendar, the movement of huge masses of people within the country and abroad is expected – this is a risk that can provoke not only a health crisis in China, but in the worst case, new bursts of morbidity in other countries. It is impossible to predict the situation in the healthcare sector, but there is hope that at least in the spring the incidence in China will decline, the expert added.
“If China still manages to cope with the record outbreak of covid and successfully open the economy, then, combined with economic stimulus measures, this could revive domestic demand, production and overall economic activity in the country, GDP growth could accelerate to 4.5-5%. But at the same time, demand for raw materials (China is the largest importer in the world) may intensify, which may resume the increase in world prices and make it difficult for central banks to fight inflation,” Belenkaya concluded.
Earlier, on January 12, Doctor of Economic Sciences, acting. Yevgeny Smirnov, head of the Department of World Economy and International Economic Relations at the State University of Management, said that covid restrictions had caused serious damage to China, and given the size of the Chinese economy and its importance on a global scale, this could significantly affect the dynamics of the world economy and international trade.
