Until January 14, China has not released its national economic data for the fiscal year of 2022. According to reports published by the provincial and municipal governments in China, many Chinese cities still made economic progress in 2022, despite frequent disturbances by strict Covid-19 containment measures and later in the year, the massive infections that paused the regional economy.
As shown in the reports, all the major Chinese cities achieved a positive GDP growth rate higher than 2%. For 2023, most of the municipal governments set the goal of growth at 5.5% to 7%.
Some Chinese analysts pointed out that China’s economy is still largely driven by exports. They stressed the risk that Chinese exports might face pressure from weakening European and American demand for Chinese goods caused by their weakening economy. Moreover, the raises in US interest rates since March 2021 had caused widespread global inflation, affecting Chinese economy.
The analysts suggested that domestically, the Chinese economy faced a labor force shortage after reopening, low consumption predicted to persist until the second half of 2023, and the aggravating American decoupling with China that pressured Chinese exports.
Most Chinese economic institutes predict the overall GDP growth of China to be around 5%. Some analysts from foreign financial or research institutes have made similar predictions.
The logic behind their optimism is that China will embrace rapid short-term recovery by abandoning the economically crippling covid-19 policies and adopting expansionary economic policies that stimulate national consumption. In terms of statistics, China’s GDP growth in 2022 is also predicted to be abnormally low because of the earlier policies, indicating a lower starting point for China’s GDP in 2023. Still, as they suggested, China’s long-term GDP growth is far from determined, depending on factors not clarified yet.
However, the World Bank has just made big cuts on its 2023 global economic outlook. The US economy growth rate prediction is cut from 2.4% to 0.5%, Japan from 1.3% to 1%, and Europe and Central Asia from 1.5% to 0.1%. For China, the predicted growth rate is cut from 5.2% to 4.3%.
According to World Bank, “the United States, the euro area, and China are all undergoing a period of pronounced weakness, and the resulting spillovers are exacerbating other headwinds faced by emerging market and developing economies.” Thanks to the easing of pandemic-related restrictions in China, economic activities would manage to gradually recover in China.
“The downward revisions are broad-based and reflect COVID-related disruptions and protracted weakness in the real estate sector in China and weaker-than-expected goods export growth across the region. Inflation is also expected to ease somewhat after peaking in 2022,” said World Bank.
David Malpass, the president of the World Bank, said on CNBC’s “Closing Bell” last Tuesday that in 2023, China is a critical variable in determining global demand and supply and thus, global economic performance. The factor now is how fast and effective China will be when pulling itself out of the shock by a rapid reopening after a long period of austere covid containment policy. Fed’s hiking, David claimed, will also be an influencer shaping the Chinese economic response in 2023.
Regardless of their background, most agencies and analysts predicted positive growth in China in 2023 which is significantly better than last year, when China was severely hindered by its strict covid-19 policy. Their divergence is on the scale of that short-term positive growth and its perseverance in longer terms. As most of them pointed out, there are still political and social uncertainties affecting the future of the Chinese economy, so only time can tell how the latter would evolve.