China experienced one of its weakest growth in four decades in 2022, according to official figures published on Tuesday, when health restrictions and the real estate crisis weighed heavily on activity. The Asian giant has followed a strict health policy called “covid zero” for almost three years, which has largely protected the population against covid-19.
These draconian measures, which relied on lockdowns as soon as positive cases are discovered, travel restrictions and widespread testing, have severely disrupted production and supply chains. Many factories and businesses had to close overnight due to a handful of Covid-19 cases, while the Chinese limited their outings and leisure activities to avoid coming into contact.
These measures were finally lifted in early December. But the decision has caused an exponential increase in the number of Covid patients, posing a major obstacle to recovery. If the peak of contamination has been reached, “uncertainty remains about a future wave or new variants,” says economist Wang Tao, from UBS bank.
Growth almost twice below the established target
In this context, China saw its gross domestic product grow by 3% in 2022, the National Bureau of Statistics (BNS) announced on Tuesday. This rate, which would make many the envy of most of the major economies, is, however, one of the lowest in 40 years for the Asian giant. A group of economists anticipated a more pronounced slowdown (+2.7%).
Beijing had set a target of 5.5%, a rate already well below that of 2021, when China’s GDP grew by more than 8%, driven by recovery after the first wave of the epidemic. Last year, China’s growth was the weakest since the contraction of 1976 (-1.6%) and the slowdown of 2020, the first year of the pandemic (+2.3%). In the fourth quarter, Chinese growth slowed for more than a year (+2.9%), compared to 3.9% in the previous quarter. From one quarter to the next, the most accurate criterion for comparing the economy, the rate remains stable (+3.9%).
In 2022, the economy “faced storms and troubled waters” globally, SNB official Kang Yi told reporters. Thus, in December, retail sales, the main indicator of household spending, fell again (-1.8% annual), after the collapse already registered in November (-5.9%). For its part, industrial production fell last month (+1.3% year-on-year), after rising 2.2% in November.
The incomplete unemployment rate drops to 5.5%
The population of China, the world’s most populous country, also fell in 2022, a historic first since the early 1960s. A total of 9.56 million births were recorded last year, which has not offset the 10, 41 million deaths. announced the SNB.
For its part, the unemployment rate fell slightly in December (5.5%), compared to 5.7% a month earlier. However, this figure paints an incomplete picture of the economic situation, since it is only calculated for urban dwellers. It effectively excludes the millions of migrant workers, who are particularly vulnerable to the economic downturn. Their situation has been exacerbated by a crisis in the real estate sector, a sector that, together with construction, accounts for more than a quarter of China’s GDP and is a major source of low-skill jobs.
The real estate sector has suffered since 2020 a tightening by Beijing of the conditions of access to credit for real estate developers, in order to reduce their indebtedness. 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 have been announced for certain developers.
Growth forecasts above 4.3% for 2023
Eminently political and subject to caution, China’s official GDP figure is, however, highly scrutinized, given the country’s weight in the global economy.
In short: “don’t expect bad news”, according to analysts from the firm Trivium, specializing in economics and politics. This year, China should see its GDP grow by 4.3%, according to World Bank forecasts, although they were revised downward last month.
Source: BFM TV
