TO NO ONE’S particular surprise, the Covid-19 pandemic weighed heavily on China’s economy in 2022. GDP growth for the year was 3.0%, the National Statistics Bureau reported.
That was slightly better than the consensus forecast of private economists — no doubt every drop of output that could be found in the fourth quarter was found, perhaps more — but far short of the official goal of 5.5% growth for the year.
Except for the first year of the pandemic, one has to go back to 1976 — the year Mao died — to find a year in which the economy grew more slowly.
It was not only the pandemic that held back the economy. The property market remained deeply troubled, and the war in Ukraine roiled the global economy, pushing up commodity import prices for China and weakening demand for its exports.
Covid-19 will likely continue to weigh on the economy in 2023, even as the unexpectedly sudden dropping of the zero-Covid policy allows it to reopen because of the risk of new surges of infection among a still under-vaccinated population.
Last week, Kristalina Georgieva, managing director of the International Monetary Fund, urged Beijing to continue reopening its economy, suggesting that if it does, China will return to contributing to global growth by around the middle of the year.
In October, the Fund forecasted that China’s economy would grow by 3.2% in 2022 and 4.4% this year. Earlier this month, the World Bank forecast 4.3% GDP growth for this year as the lifting of pandemic restrictions released pent-up consumer spending. (Its estimate for 2022, at 2.7%, undershot slightly.
December’s better-than-expected retail sales figures, also newly released, support for the World Bank’s view. Though still lower than a year earlier, they were down by only 1.8%, compared to November’s year-on-year drop of 5.9%.
Getting private investment going again will also be critical to this year’s outcome, one reason that senior leaders have been talking up the importance and prospects of private businesses in recent days and signalling that the tech crackdown is over for now.
Private investment grew by just 0.9% in 2022, compared with 8.7% and 4.7% in the two years before the pandemic started; state investment grew by 10.1% last year, compared to 1.9% and 6.8% in 2018 and 2019.
The level of social financing, a proxy for total debt, rose to 286% of GDP at year’s end, a reminder of the constraints on public spending to stimulate the economy, and that there is still plenty of work on deleveraging to be done.
Beijing will also have to deal with the economic impacts of its ageing and now contracting population. China’s population started shrinking in 2022 for the first time in six decades, the National Statistics Bureau reported today.
The decline in the fertility rate that has been evident since 2016 was the main reason, but the mortality rate also increased. The lifting of zero-Covid will likely bring more pandemic-related deaths in 2023.
The National Statistics Bureau data show that 62% of the population was of working age (16-59 years old), down from around 70% a decade ago, underlining the country’s economic challenges from its demographic shift. China could well lose its race to get rich before it gets old.