China’s economy shows signs of recovery, though impact of Covid-19 curbs persist
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The impact from China’s strict Covid-19 controls which were lifted in late 2022 continues to linger.
PHOTO: REUTERS
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BEIJING - China’s economy showed signs of recovery in January and February as people spent more, though the impact from the country’s strict Covid-19 controls, which were lifted in late 2022
Official data on Wednesday showed that the retail sector reversed the 1.8 per cent decline in December 2022 to grow 3.5 per cent in the first two months of 2023, in line with expectations of analysts polled by Bloomberg and Reuters.
Fixed asset investment, including construction projects and building of factories, which Beijing has been using generously to prop up growth in 2022, rose 5.5 per cent year on year in the first two months of 2023.
The latest figure surpassed analyst expectations by around one percentage point, and was higher than the 5.1 per cent increase recorded for the whole of 2022.
Factory output grew slower than expected, rising 2.4 per cent, compared with the same period last year. Bloomberg and Reuters had both forecast a 2.6 per cent rise.
The unemployment rate in urban areas crept up to 5.6 per cent in February, a slight uptick from the 5.5 per cent in December 2022 and January. The jobless rate for those aged between 16 and 24 rose to 18.1 per cent, up from the 16.7 per cent recorded in December 2022.
The National Bureau of Statistics (NBS) typically releases January and February data together to avoid the numbers being distorted by China’s biggest holiday – Chinese New Year – which can stretch up to 15 days.
NBS spokesman Fu Linghui said on Wednesday that while the economy is showing a steady recovery, “the external environment is even more complex, inadequate demand remains prominent and the foundation for economic recovery is not solid yet”.
Dr Larry Hu, chief China economist at financial services firm Macquarie Group in Hong Kong, said that “overall, the data suggests that the economy is bouncing back from the trough last December and this January, when Covid-19 swept through the country”.
The removal of Covid-19 controls in late 2022 had resulted in mass outbreaks around the country
Consumption is set to be the biggest driver for growth in 2023, given such a low base in 2022, added Dr Hu, but weak confidence among consumers will mean that the recovery will be “a gradual process”.
China economist Louise Loo at Oxford Economics in Singapore said spending during the festivities and expenditures on medicine had likely helped the retail sector.
“We remain cautious,” she said.
“Part of the strength in today’s activity data also reflects state support, as the benefits of the stimulus doled out last year continued to be reflected in fixed asset investments,” she added, noting that state-driven investments grew 10.5 per cent year on year, while private investments grew at a more modest pace of 0.8 per cent year on year.
“With no major stimulus announced, it remains to be seen if the private sector can sufficiently pick up the slack as the authorities’ policy stance turns more cautious this year,” she said, referring to China’s annual parliamentary sessions which concluded on Monday.
Beijing is targeting growth of around 5 per cent in 2023,
The world’s second-largest economy grew 3 per cent in 2022, missing its target of around 5.5 per cent, following prolonged lockdowns and mass quarantines for most of the year as part of its zero-Covid policy.
