China’s economic growth fell to its second-lowest level in at least four decades last year under pressure from anti-virus controls and a real estate slump, but activity is reviving after restrictions that kept millions of people at home and sparked protests were lifted.
The world’s No. 2 economy grew by 3% in 2022, less than half of the previous year’s 8.1% rate, official data showed yesterday. That was the second-lowest annual rate since at least the 1970s after 2020, when growth fell to 2.4% at the start of the coronavirus pandemic.
China’s slump has hurt its trading partners by reducing demand for oil, food, consumer goods and other imports. A rebound would be a boost to global suppliers who face a growing risk of recession in Western economies.
Economic growth sank to 2.9% over a year earlier in the three months ending in December from the previous quarter’s 3.9%, the National Bureau of Statistics reported.
Consumer spending started to recover but still was weak in December after the ruling Communist Party abruptly ended its “zero-COVID” controls.
“The outlook for GDP growth in 2023 has improved,” said Iris Pang of ING in a report.
To shore up the economy, the ruling party also has backtracked on key financial and industrial policies, winding down anti-monopoly and data crackdowns aimed at tightening control over China’s tech industries. That campaign wiped hundreds of billions of dollars off the share prices of e-commerce giant Alibaba and other companies on foreign stock exchanges.
The government is loosening controls on real estate financing after tighter controls on debt that Chinese leaders worry is dangerously high caused economic growth to slide starting in 2021.
China’s economic growth is in long-term decline after hitting a peak of 14.2% in 2007, hampered by hurdles including an aging, shrinking workforce and growing curbs on Chinese access to Western technology due to security concerns.
China’s population of working age people 16 to 59 has fallen by about 5% from its 2011 peak to 876.6 million last year, based on official data released yesterday. The working-age group as a share of the population of 1.4 billion fell to 62% from 70% a decade ago (see p6).
The International Monetary Fund and private sector forecasters expect economic growth no higher than about 4% through the rest of the decade.
In December, retail sales fell 1.8% from a year earlier, but that was an improvement over the previous month’s 5.9% contraction. Wary consumers are returning only gradually to shopping malls and restaurants amid a surge in COVID-19 infections that has flooded hospitals with patients.
Investment in factories, real estate and other fixed assets in December rebounded to 0.5% growth over the previous month following November’s 0.5% contraction.
“The good news is that there are now signs of stabilization,” Louise Loo of Oxford Economics said in a report.
Growth is forecast to improve this year to a still-modest level of about 5%. Economists point to weakness in real estate, an important economic engine, and slowing exports.
Factory output in 2022 rose 3.6% over the previous year, suggesting activity tumbled after hitting 4.8% in the third quarter of the year as U.S. and European demand for Chinese goods weakened under pressure from interest rate hikes to cool record-setting inflation.
The surprise end of some of the world’s most pervasive anti-virus controls followed a promise by the Communist Party in November to reduce the cost and disruptions of “zero COVID.” JOE McDONALD, BEIJING, MDT/AP