Xi Jinping estimates that China’s GDP in 2022 grew by at least 4.4%. But Covid misery looms

hong kong
CNN
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China’s economy grew at least 4.4% in 2022, leader Xi Jinping says, a figure far stronger than many economists expected. But the current wave of Covid could hamper growth in the coming months.

China’s annual GDP is expected to have topped 120 trillion yuan ($17.4 trillion) last year, Xi said in a televised New Year’s Eve speech on Saturday. That implies growth of more than 4.4 %, which is a surprisingly robust number.

Economists generally expected growth to collapse to a rate of between 2.7% and 3.3% for 2022. The government had maintained a much higher annual growth target of around 5.5% .

“The Chinese economy is resilient and has good potential and vitality. Its long-term fundamentals remain unchanged,” Xi said in his speech. “As long as we are confident and seek steady progress, we will be able to achieve our goals.”

China’s economy has been hit by widespread Covid shutdowns and a historic housing downturn last year. Policymakers have pledged to seek a turnaround in 2023. They are betting that the end of zero-Covid and a series of housing support measures will revive domestic consumption and support growth.

But an explosion in Covid infections, triggered by the abrupt easing of pandemic restrictions in early December, is clouding the outlook. The country is battling its biggest Covid outbreak.

Beijing last week announced it would end quarantine requirements for international arrivals from January 8, marking a major step towards reopening its borders.

The sudden end to restrictions caught many people in the country off guard and strained the healthcare system.

The rapid spread of infections has kept many people indoors and emptied shops and restaurants. Factories were forced to close or reduce production because workers fell ill.

Key data released on Saturday showed factory activity in the country contracted in December at the fastest pace in nearly three years. The official Purchasing Managers’ Index (PMI) for the manufacturing sector fell to 47 last month from 48 in November, according to the National Bureau of Statistics.

This is the biggest drop since February 2020 and also marks the third consecutive month of contraction for the index. A reading below 50 indicates that activity is decreasing.

The non-manufacturing PMI, which measures activity in the service sector, dipped to 41.6 last month from 46.7 in November. It is also the lowest level in almost three years.

“Over the next two months, it would be difficult for China and the impact on Chinese growth would be negative,” Kristalina Georgieva, managing director of the International Monetary Fund, said in an interview broadcast by CBS News on Sunday.

“The impact on the region would be negative. The impact on global growth would be negative.

Analysts also expect the economy to get off to a bumpy start in 2023 – with a contraction likely in the first quarter as surging Covid infections dampen consumer spending and disrupt factory activity.

However, some predict the economy will rebound after March as people learn to live with Covid. Many investment banks now expect China’s growth in 2023 to reach 5%.