China’s growth in 2022 is expected to be the lowest in 40 years

China’s economic growth for 2022 is likely to be among the weakest in four decades after the twin crises of the pandemic and housing woes, analysts said ahead of Tuesday’s GDP announcement.

Ten experts polled by AFP forecast the world’s second-biggest economy to grow by an average of 2.7 percent year-on-year in gross domestic product (GDP), a sharp slump from China’s growth of more than 8 percent in 2021.

It could also be China’s slowest pace since a 1.6 contraction in 1976 – the year Mao Zedong died – and excluding 2020 after the COVID-19 virus emerged in Wuhan in late 2019.

Beijing had set a growth target of around 5.5 percent for 2022, but this has been undermined by the government’s “zero-COVID” policy, which has slowed manufacturing activity and consumption.

Strict lockdowns, quarantines and mandatory mass testing led to the abrupt shutdowns of manufacturing plants and businesses in key hubs – like Zhengzhou, home of the world’s largest iPhone factory – and sparked repercussions in the global supply chain.

Beijing abruptly eased pandemic restrictions in early December after three years of enforcing some of the toughest COVID measures in the world.

China is grappling with a surge in COVID cases that has overwhelmed its hospitals and medical staff.

This will likely be reflected in fourth-quarter 2022 growth, which will also be announced on Tuesday along with a host of other indicators including retail sales, industrial production and employment.

“The fourth quarter is relatively difficult,” said economist Zhang Ming of the Chinese Academy of Social Sciences in Beijing.

“Whether it’s consumption or investment metrics, growth is slowing.”

China’s exports experienced their biggest slump since the pandemic began in December, shrinking 9.9 percent year-on-year, while consumption was in the red in November and investment fell.

“The three horse-drawn carriages of China’s economy all face relatively obvious downward pressure in the fourth quarter,” Zhang said.

Rabobank analyst Teeuwe Mevissen echoed Zhang, saying that the most recent quarter following the easing of health restrictions in December “will almost certainly show a decline due to the rapid spread of Covid”.

“This will worsen both on demand and on supply conditions,” he said.

Problems in the real estate sector also continue to weigh on growth, Mevissen said.

This sector, which together with construction accounts for more than a quarter of China’s GDP, has been suffering since Beijing began cracking down on excessive borrowing and rampant speculation in 2020.

This regulatory tightening marked the beginning of financial worries for Evergrande, the former Chinese property number one, which is now choking on enormous debt.

Since then, property sales have fallen in many cities and many developers are struggling to survive.

However, the government appears to be taking a more conciliatory approach to revitalizing this key 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.

Some analysts took these measures as grounds for optimism.

“The transition period is likely to be bumpy as the country may have to deal with rising cases and increasingly overburdened healthcare systems,” warned HSBC analyst Jing Liu, forecasting a near-term slowdown.

But after three years of health restrictions, “China’s reopening process has begun,” she said.

The World Bank forecasts that China’s GDP will recover to 4.3 percent by 2023 – still below expectations.

Economist Larry Yang declared 2023 the “Year of Returning to Certainty.”

He said he expects growth to accelerate quarter-on-quarter in 2023 and forecast 5 percent of GDP for the full year — a prediction in line with other analysts polled by AFP.

“The worst of the economy itself is already over,” Yang said.

© 2023 AFP

Leave a Reply

Your email address will not be published. Required fields are marked *