40-year low in economic growth for China in 2022

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China’s economic growth for 2022 is expected to be among its weakest in four decades due to the twin crises of the pandemic and property woes, as reported by experts ahead of Tuesday’s GDP announcement. The experts interviewed by AFP forecast an average 2.7 percent year-on-year rise in GDP for the world’s second-largest economy, a sharp plunge from China’s 2021 growth of more than 8 percent. It could also be China’s slowest pace since a 1.6 contraction in 1976, excluding 2020 after the Covid-19 virus emerged in Wuhan in late 2019.

China’s “zero-Covid” policy, which put the brakes on manufacturing activity and consumption, undermined the growth target of around 5.5 percent for 2022 set by Beijing. Strict lockdowns, quarantines, and compulsory mass testing prompted abrupt closures of manufacturing facilities and businesses in major hubs, like Zhengzhou, home of the world’s biggest iPhone factory, and sent reverberations across the global supply chain.

Beijing abruptly loosened pandemic restrictions in early December after three years of enforcing some of the harshest Covid measures in the world. China is currently battling a surge in Covid cases that has overwhelmed its hospitals and medical staff, which is likely to reflect in 2022’s fourth-quarter growth, which will also be announced on Tuesday alongside a series of other indicators such as retail, industrial production, and employment.

Economist Zhang Ming of the Chinese Academy of Social Sciences in Beijing said, “No matter whether it’s by the metrics of consumption or investment, the growth is slowing.” China’s exports took their biggest plunge since the start of the pandemic in December, contracting 9.9 percent year-on-year, while consumption was in the red in November, and investment has slowed.

Problems in the property sector are also still weighing on growth. This sector, which along with construction accounts for more than a quarter of China’s GDP, has been suffering since Beijing started cracking down on excessive borrowing and rampant speculation in 2020. Real estate sales have since fallen in many cities and many developers are struggling to survive.

However, the government appears to be taking a more conciliatory approach to reviving this key sector. Measures to promote “stable and healthy” development were announced in November, including credit support for indebted developers and assistance for deferred-payment loans for homebuyers.

Despite the near-term slowdown, some analysts took these measures as a reason for optimism. The World Bank forecast China’s GDP will rebound to 4.3 percent for 2023, still below expectations. Economist Larry Yang declared 2023 as “the year of returning to certainty”. He said he expected growth to accelerate quarter by quarter in 2023, forecasting 5 percent GDP.