China’s GDP ordered to bow – Newspaper Kommersant No. 8 (7453) dated 01/18/2023

China’s GDP in the fourth quarter of 2022 grew by 2.9% compared to the same period in 2021, the National Bureau of Statistics said. A significant slowdown due to the difficulties of “exiting quarantine” (in the third quarter, China’s GDP grew by 3.9%) reduced the final result of 2022 to 3% GDP growth against the background of 8.1% a year earlier and the government target of 5.5% . In recent years, a lower figure occurred only in the first year of the coronavirus pandemic: in 2020, the PRC economy was the only one of the major ones to maintain growth, but then it slowed down to 2.2%. However, the details indicate the possibility of an early recovery in China’s economic dynamics: for example, retail turnover in December fell by 1.8% after falling by 5.9% in November, as a result, the annual rate fell by 0.2%. A positive signal was the reduction in unemployment to 5.5% in December from 5.7% a month earlier.

Analysts suggest that the removal of a significant part of the “covid” restrictions in the PRC after almost three years of “zero tolerance” will accelerate the growth of the Chinese economy in 2023, the same representative of the Chinese authorities convinced the participants of the World Economic Forum in Davos yesterday (see text next to it), referring to the priority of state regulation measures to support private demand in 2023. However, a number of indicators indicate that the Chinese economy is undergoing structural changes that will not allow it to return to its former growth rates in the long term. Thus, although capital investments increased by 5.1% over the year, their dynamics has been declining since the beginning of the year (see chart), as is industrial growth: industrial production increased by 1.3% after rising by 2.2% in November; the increase was 3.6%. A number of indicators demonstrate even more dramatic dynamics: for example, investments in real estate in 2022 fell by 10% y/y for the first time since 1999 – measures taken at the end of the year to support supply and demand did not have time to affect the market. Another alarming signal discussed by world markets was the first decline in the population of China since 1961. In the long term, this will halt the expansion of the labor force and tie the country’s economic growth to increased labor productivity, which in turn will require investment and coordinated government policies to rebuild the Chinese economy.

Oleg Sapozhkov