China will announce its growth for 2022 on Tuesday, which should be one of the weakest in four decades, due to the health and real estate crises that are heavily penalizing activity.
A group of 10 experts interviewed by AFP expects an average increase of 2.7% in one year in the gross domestic product (GDP) of the world’s second largest economy.
This would be its slowest pace since the 1976 contraction (-1.6%), if we exclude 2020, the first year of the pandemic (+2.3%).
Last year, China’s GDP grew by more than 8%. Beijing had set a growth rate of around 5.5% for 2022.
But that objective was undermined by the strict health policy known as “covid zero”, which for most of the year put a brake on activity and consumption.
This costly strategy relied on widespread and near-mandatory screening of the population, as well as quarantining those who tested positive.
These measures frequently led to the closure of factories and businesses, weighing on activity, travel and supply chains, but also discouraging consumption.
To the exasperation of the population, China lifted these restrictions in December without prior notice. Regardless, activity has been struggling to restart ever since, due to an explosion in the number of Covid patients.
damaged engines
China will also release its growth figure for the final quarter of 2022 on Tuesday, along with a host of other indicators.
It will “undoubtedly” be lower than in the third quarter (+3.9%) due to the “rapid spread of the virus” in December, after the lifting of sanitary restrictions, warns Teeuwe Mevissen, an analyst at RaboBank.
Especially since the “three engines of the Chinese economy” were struggling in the fourth quarter, economist Zhang Ming of the Chinese Academy of Social Sciences in Beijing told AFP.
Exports from China experienced their biggest drop since the start of the pandemic in December (-9.9% year-on-year), while consumption was in the red in November and investment fell.
In addition, “real estate problems continue to hinder growth,” stresses Mr. Mevissen.
This sector, which together with construction represents more than a quarter of the country’s GDP, has been suffering since the measures adopted by Beijing in 2020 to reduce indebtedness.
This regulatory tightening had marked the beginning of financial worries for Evergrande, the former Chinese real estate number one now strangled by an abysmal slate.
Since then, real estate sales have declined in many cities and many developers are struggling to survive.
“The worst is behind us”
In order to revive an essential sector of the economy, the government appears to have taken a more conciliatory approach in recent weeks. In particular, credit support measures for developers have been announced.
After three years of sanitary restrictions, “the reopening in China is underway,” says analyst Jing Liu, from HSBC bank.
“But this transition phase will be tortuous” with the risk of new epidemic rebounds, warns Ms. Liu, without excluding “in the short term” a further slowdown in growth.
“2023 will be the year of a return to certainties” after the unexpected lockdowns during the epidemic that destabilized the economy, estimates independent economist Larry Yang.
This year, China should see its GDP rebound to 4.3%, according to World Bank forecasts, though they were revised downward last month.
The group of experts interviewed by AFP expects 5%.
From now on, “the worst is behind us,” Mr. Yang wants to believe.
Source: BFM TV
