China’s 2022 economic performance rests with its zero-COVID policy

        China’s economy grew 4.8% YoY in the first quarter of 2022 despite facing various challenges. While there was an uptick in private consumption in the first two months of the year – thanks to increased demand during the Chinese New Year festival and the 2022 Winter Olympics, such growth faltered in March due to widespread lockdowns in many provinces across the country, as reflected through the contraction in retail sales of multiple product categories. Meanwhile, China’s manufacturing sector was facing rising production costs, supply chain bottlenecks, and especially a shortage of raw materials required for the production of semiconductors and vehicles, owing to the Russia-Ukraine conflict. Meanwhile, fixed asset investment in the high-tech industry that is in alignment with China’s quest for greater self-reliance in technology, healthcare and education continued to grow, thanks to the government’s “common prosperity” drive. International trade continued to thrive, as well. However, China’s March unemployment rate grew over-month due to the new wave of COVID-19, while the inflation rate remained relatively low compared to other countries.   

        However, China is expected to face economic risks ahead, including the slowing global economy, owing to the ongoing Russia-Ukraine conflict, more debt defaults by property developers and stringent lockdown measures. Given this, China’s economic growth in 2022 is projected to be in the range of 4.4-4.8%YoY, supported chiefly by the government’s stimulus packages, public and private investment, and favorable export growth. In spite of this, close attention must be paid to the COVID-19 situation in China and the government’s approach in achieving its zero-COVID policy, going forward.