As a result of severe COVID-19 regulations and a downturn in the real estate market in the fourth quarter, China's economic growth in 2022 fell to one of its lowest levels in over 50 years.
Beijing abruptly lifted its stringent anti-virus restrictions last month, which had severely curtailed economic activity in 2022. However, the relaxation has also resulted in a sharp increase in COVID-19 cases, which economists say may impede near-term growth and put pressure on policymakers to announce additional stimulus this year.
GDP increased by 2.9 percent from October to December of last year, according to National Bureau of Statistics (NBS) figures released on Tuesday (Jan 17), slower than the third quarter's rate of 3.9 percent. The rate nonetheless outperformed the 0.4% increase in the second quarter and market estimates of a 1.8% increase.
On a quarterly basis, GDP stagnated at 0.0 percent in the fourth quarter, compared to 3.9% growth from July to September.
GDP grew by 3.0% in 2022, significantly undershooting the stated goal of "around 5.5%" and slowing down from 2021's 8.4% growth rate. It is the lowest performance since 1976, the final year of the devastating ten-year Cultural Revolution, when the economy was at its worst, excepting the 2.2% expansion that occurred after the initial COVID-19 struck in 2020.
Along with the GDP statistics, other indices for December, including retail sales and factory output, exceeded projections but still fell short of predictions.
"Activity data in December surprised broadly to the upside, but remains weak, particularly across demand-side segments such as retail spending," Louise Loo, senior economist at Oxford Economics, said in a note.
According to Loo, "data so far supports our long-held view that China's reopening boost will be somewhat anemic at the beginning, with consumer spending being a key laggard in the initial stages."
Others, like Hao Zhou, chief economist at GTJAI, anticipate a sustained increase in investment and consumption, supported by China's openness and government-led infrastructure expenditure.
According to a Reuters survey, growth is anticipated to increase to 4.9% in 2023 as Chinese policymakers work to address the "zero-COVID" policy and the country's catastrophic housing market collapse. Most economists anticipate that growth will accelerate after the second quarter.
A robust bounce in China could dampen the projected global recession, but a dramatic recovery in the Asian powerhouse could also generate more inflationary issues globally, just as authorities are beginning to get a handle on record price increases.