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19 Jan 2023

Econ Digest

China’s economy in 2022… the lowest growth rate in more than five decades under the zero-COVID policy pressure


        China’s economic growth in 4Q22 dropped to 2.9% from 3.9% YoY in 3Q22, but beating market expectations of 1.6%. China’s zero-COVID policy resulted in its economic growth of only 3.0% in 2022, which was below the government’s target of 5.5% and the lowest growth in more than five decades. In 2022, consumer spending shrank by 0.2% YoY. China’s exports slowed at the end of the year due to the global economic slowdown, resulting in full-year growth of only 7.0% YoY. However, China’s economic growth in 2022 was mainly driven by fixed-asset investment, which grew by 5.1% YoY.

        Cancellation of the zero-COVID policy should contribute to a better recovery of the Chinese economy in 2023, although the Chinese economy will still be hit hard by public health sufficiency issues in the first quarter following an increase in infections and deaths, which will result in an unlikely full recovery of Chinese economic activity. The number of COVID-19 infections is expected to pass the peak and gradually decrease in 1-2 months after Chinese New Year, and economic activities, including travel and tourism, will tend to accelerate in the second quarter of 2023, which will help support further economic recovery. However, the following key risks to China still need to be closely monitored, including the ailing property sector, tense geopolitical risks such as the situation between China and Taiwan, and the U.S.-China conflict, structural issues and policy uncertainty, and a global economy tending to slow growth due to tightening monetary policy.  KResearch projects that the Chinese economy in 2023 is expected to expand by 4.6% YoY.

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Econ Digest