The Chinese economy grew by 3 per cent in 2022, the second-lowest rate since the 1970s, missing an official target of “around 5.5 per cent,” as COVID controls and other headwinds continued to drag on the world’s second-largest economy.
Beijing hopes to get things back on track this year, after an abrupt pivot away from zero-COVID last month enabled the country to reopen, even as infections spiked nationwide.
“We continue to face a complex and challenging international environment, domestic demand is shrinking and there are supply chain issues,” said Kang Yi, director of the National Bureau of Statistics. He added that the “economy recovery is not yet solid.”
Mr. Kang said China’s growth rate was still “relatively high” compared with other major economies, and predicted a stronger performance in the coming year.
Major headwinds remain however, not least demographics: According to statistics also released Tuesday, China’s population shrank in 2022 for the first time in 60 years, a trend that is likely to continue despite efforts to encourage people to have more babies after decades of the “one-child policy.”
Growth in the last quarter of 2022 came in toward the higher end of expectations, at 2.9 per cent from a year earlier, the NBS said. The overall figure of 3 per cent is the second-lowest growth rate since 1976, beating only 2020, when China first grappled with COVID.
That year, Beijing recorded growth of 2.2 per cent, far below the 2019 figure but also the only major economy to expand, underlining China’s importance in driving global economic growth.
Previously, the World Bank had predicted that China’s economy would grow by 2.7 per cent in 2022, lagging global growth of 2.9 per cent, the first time in four decades for the Chinese economy. That the official figure narrowly beat this may renew suspicion over how Beijing massages economic data for political purposes.
“Economic activity in China deteriorated markedly in 2022,” the World Bank said in a report this month, while forecasting 4.3-per-cent growth in the coming year, “as the lifting of pandemic restrictions releases pent-up consumer spending.”
That report warned that there was “significant uncertainty about the trajectory of the pandemic and how households, businesses, and policy-makers in China will respond.”
“The economic recovery may be delayed if reopening results in major outbreaks that overburden the health sector and sap confidence,” it added. “A slowdown in China would add further headwinds to global activity, with adverse spillovers to global trade, commodity markets and financial markets.”
Aninda Mitra, head of Asia macro and investment strategy at BNY Mellon Investment Management, said the dismantling of zero-COVID controls would boost consumption and services, even as uncertainties remain because of continuing outbreaks.
“The country’s economic reopening has been ‘messier’ and exacted a large human toll, but it has been quicker,” he said in a note. “Alongside an easing of restrictions in the property and tech sector, China’s reopening is likely to result in an earlier return of economic normalcy.”
China is about to mark the Lunar New Year, with a week-long national holiday beginning on Jan. 21. The authorities expect around 2 billion trips during this period, as Chinese consumers take advantage of relaxed controls on both domestic and international travel.
While this will likely deliver a short-term economic boost, particularly to the beleaguered tourist sector, it will also result in COVID spreading throughout the country, with some local authorities predicting another wave of cases cresting toward the end of this month.
China on Saturday said it had recorded 60,000 deaths since lifting COVID controls in late December, a substantial increase on the previous figure of around 5,500 but still far short of what most models predict. The actual death toll is believed to be approaching a million, with a substantial portion of the population already infected and many hospitals struggling with the influx of patients, particularly in rural areas.
Those excess deaths will accelerate the shrinking population, a major challenge to China’s rulers as they attempt to maintain the country’s breakneck economic growth, a key source of political legitimacy.
In 2022, China’s population decreased by 850,000, the NBS said, with a natural population growth rate of -0.60 per cent. This trend will accelerate in coming years, partly because of the continuing effects of the decades-long “one child policy” but also because of societal trends toward having less children seen in developed economies.
Demographic shifts could have a major drag on future growth, with some economists predicting it could delay China overtaking the U.S. as the world’s largest economy, or potentially forestall that ever happening.
The Globe and Mail, January 16, 2023