China 2022 GDP growth slows to 3%; re-opening to drive 2023 recovery

SINGAPORE (ICIS)–China’s economy grew by 3% in 2022, marking its slowest pace of expansion in decades, highlighting the impact of the country’s long-standing zero-COVID strategy.

• 2022 figure marks second-lowest GDP growth in more than 40 years
• Recovery expected in 2023 as China re-opens
• External headwinds remain

The full-year GDP growth was well below the Chinese government’s target of “around 5.5%” and represented a sharp slowdown from the 8.1% expansion recorded in 2021.

At 3.0%, the 2022 growth was the second weakest posted since 1976, after the 2.2% pace registered in 2020 at the height of the coronavirus pandemic.

Intermittent lockdowns due to flare-ups of infections in several parts of the country throughout last year, in accordance with the government’s zero-COVID policy, weighed heavily on the business activities.

COVID-related restrictions were not substantially eased in the world’s second-biggest economy until December 2022.

In the fourth quarter, the economy posted a 2.9% year-on-year growth, slowing down from the 3.9% pace in the prior quarter “due to a surge in Covid infections in December as the country pivoted away from its zero Covid strategy”, Singapore-based UOB Global Economics & Markets Research said in note.

China is expected to make a modest recovery this year following its re-opening, but it faces multiple challenges including a more prolonged “exit wave” of COVID infections, a slower-than-expected property sector recovery, and a worse-than-expected slowdown in external demand, Japan-based Nomura Global Markets Research said in note.

Nonetheless, there have been meaningful signs of a recovery in mobility and the number of COVID infections have seemingly peaked, it said.

In the petrochemical markets, optimism over demand recovery has taken the form of unusual stockpiling ahead of China’s week-long Lunar New Year holiday on 21-27 January.

China’s National Health Commission (NHC) has reported that the daily number of outpatient visits at fever clinics across the country peaked on 23 December, and has been declining across all provinces since then.

“High-frequency data point to a clear pick-up in mobility, with some indicators of this now trending above pre-pandemic levels based on the Chinese calendar,” Nomura said.

According to the World Bank’s latest projections, China’s GDP growth will accelerate to 4.3% as mobility restrictions ease, although the number is lower than the institution’s previous forecast of a 5.2% expansion.

“With a stronger end to 2022 than we had expected, plus indications of stronger retail expenditure ahead, the outlook for GDP growth in 2023 has improved compared to our prior outlook,” Dutch banking and financial services firm ING said in a note on Tuesday.

ING expects China’s economy to expand by 5.0% in 2023.

“That is not to ignore the fact that China still faces considerable headwinds, including external demand, with recessions likely in the US and Europe this year,” it added.

Focus article by Nurluqman Suratman

Additional reporting by Fanny Zhang

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Thumbnail image: At Haikou Port in China’s southernmost province of Hainan on 13 January, 2023. (Shutterstock)

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