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19 Apr 2023

International Economy

China’s end to zero-COVID policy supports its 1Q23 GDP to grow 4.5 %YoY (Business Brief No.3999 Full Ed.)


        The Chinese economy expanded 4.5 percent YoY in 1Q23, which was faster than anticipated by markets, led by the service sector that recorded the highest growth in 18 months. After China abandoned the zero-COVID policy, its economic activity has gradually recovered, particularly in the service sector, which surged to an 18-month high of 5.4 percent in 1Q23.          The future is bright for the Chinese economy, particularly in 2Q23. It has been projected that its economy will grow by more than 5 percent during this quarter, driven by the low base of 2022 as a result of lockdowns, favorable domestic consumption, and the implementation of monetary stimulus measures such as interest rate cuts, plus fiscal stimulus measures, including infrastructure investment. However, the recovery path may be inhibited by several risks: 1) the global economic slowdown that may hurt China’s exports; 2) ongoing issues within the property sector although it already bottomed in 2022; and 3) local government debts that may inhibit the implementation of various economic stimulus measures.  
        Despite the better-than-expected economic performance in 1Q23, that growth rate remains below the government’s target of 5 percent. As a result, it is expected that the Chinese government will introduce new monetary and fiscal stimulus measures to bolster growth in domestic consumption, and offset the slowdown in the export and property sectors. Such measures will also help China meet its quality growth target, based primarily on domestic consumption. Given this, KResearch expects that the Chinese economy will grow beyond China’s target at 5.2 percent in 2023. 

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International Economy