BEIJING – China’s economic growth in 2022 slumped to one of its worst levels in nearly half a century as the fourth quarter was hit hard by stringent Covid-19 curbs and a property market slump, raising pressure on policymakers to unveil more stimulus this year.
The quarterly growth and some of the December indicators such as retail sales beat market expectations, but analysts noted that the overall economic impulse across China remained weak and highlighted the challenges facing Beijing after it abruptly dropped its zero-Covid policy last month.
Gross domestic product (GDP) grew 2.9 per cent in the October-to-December period from a year earlier, data from the National Bureau of Statistics (NBS) showed on Tuesday, slower than the third quarter’s 3.9 per cent pace. The rate still exceeded the second quarter’s 0.4 per cent expansion and market expectations of a 1.8 per cent gain.
Beijing’s sudden relaxation of stringent anti-virus measures has boosted expectations of an economic revival this year, but it has also led to a sharp rise in Covid-19 cases that economists say might hamper near-term growth. A property slump and weak global demand also mean a rebound in growth will be heavily reliant on shell-shocked consumers.
“China’s 2023 will be bumpy; not only will it have to navigate the threat of new Covid-19 waves, but the country’s worsening residential property market and weak global demand for its exports will also be significant brakes,” Mr Harry Murphy Cruise, an economist at Moody’s Analytics, said in a note.
For 2022, GDP expanded 3 per cent, badly missing the official target of around 5.5 per cent and braking sharply from the 8.4 per cent growth in 2021. Excluding the 2.2 per cent expansion after the initial Covid-19 wave hit in 2020, it is the worst showing since 1976 – the final year of the decade-long Cultural Revolution that wrecked the economy.
Asian shares dropped after the Chinese data, while the renminbi skidded to a one-week low.
“Activity data in December surprised broadly to the upside but remains weak, particularly across demand-side segments such as retail spending,” Ms Louise Loo, a senior economist at Oxford Economics, said in a note.
”(The) data so far supports our long-held view that China’s reopening boost will be somewhat anaemic at the beginning, with consumer spending being a key laggard in the initial stages.”
A Reuters poll forecast growth to rebound to 4.9 per cent in 2023 as Chinese leaders move to tackle some key drags on growth – the zero-Covid policy and a severe property sector downturn. Most economists expect growth to pick up in the second quarter.
On a quarterly basis, GDP stalled, coming in at zero growth in the fourth quarter, compared with growth of 3.9 per cent in July to September, highlighting underlying weakness across many sectors.
Beijing’s lifting of Covid-19 curbs has seen businesses struggling with surging infections, suggesting a bumpy recovery in the near term.
“The ongoing ‘exit wave’ on the back of China’s faster-than-expected reopening has taken a heavy toll on economic activity in recent months due to surging infections, a temporary labour shortage and supply chain disruptions,” economists at Goldman Sachs said, noting the annual contractions in output of both steel products and cement in December.
Factory output grew 1.3 per cent in December from a year earlier, slowing from the 2.2 per cent rise in November, while retail sales, a key gauge of consumption, shrank 1.8 per cent last month, extending November’s 5.9 per cent drop.
China’s top leaders have pledged to prioritise consumption expansion to support domestic demand and the broad economy this year, at a time when local exporters struggle in the wake of global recession risks. The central bank is also expected to steadily ease policy this year.
China is likely to aim for economic growth of at least 5 per cent in 2023 to keep a lid on unemployment, policy sources said.
China’s property industry was among the biggest drags on growth. Investment in the sector fell 10 per cent year on year in 2022, the first decline since records began in 1999, and property sales slumped the most since 1992, NBS data showed, suggesting that government support measures were having minimal impact so far.
The authorities have rolled out a flurry of support policies targeting home buyers and property developers in recent weeks to relieve a long-running liquidity squeeze that has hit developers and delayed the completion of many housing projects.
Adding to the challenges facing the economy and the government, China’s population in 2022 fell for the first time since 1961, the NBS data showed, a historic turn that is expected to mark the start of a long period of decline in its citizen numbers and see India become the world’s most populous nation in 2023.
“The population will likely trend down from here in the coming years. This is very important, with implications for potential growth and domestic demand,” said Pinpoint Asset Management chief economist Zhang Zhiwei.
“Going forward, demographics will be a headwind. Economic growth will have to depend more on productivity growth, which is driven by government policies.” REUTERS
