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China's 2022 economic growth one of the worst on record, post-pandemic policy faces test

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China's economic growth in 2022 slumped to one of its worst levels in nearly half a century as the fourth quarter was hit hard by strict COVID curbs and a property market slump, raising pressure on policymakers to unveil more stimulus this year.

The quarterly growth and some of the December indicators such as retail sales beat market expectations, but analysts noted the overall economic impulse across China remained weak and highlighted the challenges facing Beijing after it abruptly lifted its "zero-COVID" policy last month.

Gross domestic product (GDP) grew 2.9% in October-December from a year earlier, data from the National Bureau of Statistics (NBS) showed on Tuesday, slower than the third quarter's 3.9% pace. The rate still exceeded the second quarter's 0.4% expansion and market expectations of a 1.8% gain.

Beijing's sudden relaxation of stringent anti-virus measures has boosted expectations of an economic revival this year, but it has also led to a sharp rise in COVID cases that economists say might hamper near-term growth. A property slump and weak global demand also mean a rebound in growth will be heavily reliant on shell-shocked consumers.

"China's 2023 will be bumpy; not only will it have to navigate the threat of new COVID-19 waves, but the country's worsening residential property market and weak global demand for its exports will be significant brakes," Harry Murphy Cruise, an economist at Moody's Analytics, said in a note.

Also read: Twitter Files: Pharma companies pressured Twitter to censor generic COVID-19 vaccine support

For 2022, GDP expanded 3.0%, badly missing the official target of "around 5.5%" and braking sharply from 8.4% growth in 2021. Excluding the 2.2% expansion after the initial COVID hit in 2020, it's the worst showing since 1976 – the final year of the decade-long Cultural Revolution that wrecked the economy.

"Activity data in December surprised broadly to the upside, but remains weak, particularly across demand-side segments such as retail spending," Louise Loo, senior economist at Oxford Economics, said in a note.

The "data so far supports our long-held view that China's reopening boost will be somewhat anaemic at the beginning, with consumer spending being a key laggard in the initial stages," Loo said.

A Reuters poll forecast growth to rebound to 4.9% in 2023, as Chinese leaders move to tackle some key drags on growth – the "zero-COVID" policy and a severe property sector downturn. Most economists expect growth to pick up from the second quarter.

A strong rebound in China could temper an expected global recession, but it could also cause more inflationary headaches worldwide just when policymakers are starting to get a handle on record price surges.
 

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