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China had one of its worst economic performances on record last year, the government announced Tuesday. But it is set for a robust 2023, experts said, while the U.S. and Europe face the prospect of recessions.
China’s economy expanded 3% in 2022, according to data released Tuesday by the National Bureau of Statistics, or NBS. Excluding the 2.2% growth of 2020, when major economies worldwide were crushed particularly in the opening months of the pandemic, last year was China’s worst rate in nearly 50 years.
“ ‘A real GDP growth number between 1.6% and 2.2% is more reasonable [than the officially reported 3%.’”
The 3% growth easily missed the 5% target officials set at the beginning of 2022. Even then, many independent experts question the reliability of China’s GDP data.
“A real GDP growth number between 1.6% and 2.2% is more reasonable,” Derek Scissors, chief economist for the consultancy China Beige Book, told MarketWatch.
The final quarter of the year was a drag on annual growth, as the rate of economic expansion fell to 2.9% from the third quarter’s 3.9%. While COVID restrictions and ongoing property-market woes plagued China most of 2022, they did particular damage over the last three months, the data showed.
Read: China 2022 home sales by value fell 28.3%
Experts said the weakness at the end of the year would increase pressure on policy makers to ramp up stimulus measures, though signs of more pro-growth government intervention have been visible for some time.
China’s scrapping of its stringent, years-long COVID-fighting measures will increase economic activity and citizens’ mobility, kickstarting growth in the second quarter of 2023, with even stronger improvement by the second half of the year, said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle.
This should lead to 2023 GDP growth of more than 5%, he told MarketWatch.
Other government measures are in the works.
See: China reports first population drop in decades as birthrates plunge
At a recent top-level economic summit, President Xi Jinping promised that a steady and ongoing economic recovery would kick off this year — with ample state support.
China’s finance ministry reiterated recently that it would accelerate spending to boost growth, particularly in tech and other nationally strategic sectors.
Other policies being rolled out include tax cuts for businesses and issuance of special bonds to fund targeted projects, and increased fiscal transfers to local governments, the ministry said.
See: Chinese vice premier Liu says country is open to foreign investors
Plus: China’s vice premier says growth rate can recover
It is “certain” that China’s economy will recover this year, said Lu Ting, chief China economist at Nomura. “The question is how much.”
“ ‘The joke doing the rounds is that Chinese people must have bought an extraordinary amount of medicine in December.’ ”
A bright spot in Tuesday’s data was December’s surprising improvement in retail sales, an area economists have said is crucial to a healthy rebound. Though sales in the sector fell 1.8%, that was a sharp improvement from the previous month’s 5.9% decline. Especially befuddling was that economists expected an 8.6% fall.
“The joke doing the rounds is that Chinese people must have bought an extraordinary amount of medicine in December,” Peking University finance professor Michael Pettis told MarketWatch.
See: China reports first population drop in decades as birthrates plunge
Long critical of the government’s overreliance on “low quality” growth via infrastructure and property investment, Pettis said better areas of the economy could rebound, at least temporarily.
“I expect this year’s reported GDP growth to be higher, perhaps close to 6%, and, more importantly, for the ‘high quality’ growth component to be substantial, as we get a partial revival of last year’s terrible consumption,” he said.
JLL’s Pang said China’s retail-sales growth will gradually rebound to the pre-pandemic level of around 8% before the year’s end.
But that consumer recovery won’t last, Pettis said, “until Beijing takes seriously the need to redistribute income from local governments to households, for which there is as yet no evidence.”
“There is a real question about how much longer Beijing can rely on such large increases in debt to generate acceptable GDP growth. As we have seen with the property sector, however, it is pretty clear that the longer it takes, the more painful the adjustment is likely to be.”
Read on: Optimism is returning to China’s economy. Can it last?
