China’s Worst Economic Growth in Q4
2023.01.17 02:29
China’s Worst Economic Growth in Q4
By Kristina Sobol
Budrigannews.com – Due to strict COVID controls, China’s economy slowed significantly in the fourth quarter. This caused growth in 2022 to drop to one of its lowest levels in nearly 50 years, putting pressure on policymakers to announce additional stimulus this year.
The National Bureau of Statistics (NBS) released data on Tuesday showing that GDP increased by 2.9% from October to December compared to the same period last year. This growth rate was lower than the 3.9% rate for the third quarter. Market expectations of a gain of 1.8% and the rate’s 0.4% expansion in the second quarter were still exceeded.
GDP expanded by 3.9% between July and September, compared to 0.0% growth in the fourth quarter.
KEY POINTS:
* Full-year 2022 +3.0% (f’cast 2.8%, 2021 8.4%)
* December industrial output +1.3% y/y (f’cast +0.2%, November +2.2%)
* Dec retail sales -1.8% y/y (f’cast -8.6%, November -5.9%)
* Jan-Dec fixed asset investment +5.1% y/y (f’cast +5.0%, Jan-Nov +5.3%) * Jan-Dec
The data received little attention from the yuan currency and Chinese stock markets. On the basis of hopes for a successful recovery from COVID, both have performed well this year.
COMMENTARY:
“We expect a sharp recovery of the Chinese economy, probably towards the end of the first quarter,” stated Masaaki Kanno, chief economist at Sony Financial Group and former official of the Bank of Japan. GDP is expected to rise significantly in the second quarter. As a result, we anticipate a slight increase in GDP over 2022 as a whole.”
“However, we must also take into account the global economic outlook, in which we anticipate a mild recession in the United States, other major economies, and Japan. Exports from China are expected to fall, or at least there is a risk that they will fall at that point.
Therefore, China will not be immune to changes in the global economy. Consequently, the Chinese economy’s growth rate will fall short of the government’s goal of 5% or more.”
“We can say their COVID-hit economy reached its recent bottom in the October-December quarter and that their economy is on a recovery path although it’s still not solid,” said TORU NISHIHAMA, chief economist at the DAI-ICHI LIFE RESEARCH INSTITUTE in Tokyo.
“The most significant concern that we ought to keep an eye out for is China’s dwindling population, as the data of today demonstrate. We really need to pay close attention to this because it has the potential to hinder their potential economic growth in the medium and long term.
“China’s Q4 and full-year 2022 GDP growth rates came in higher than expected,” stated Marco Sun, Chief Financial Market Analyst at MUFG Bank (China), Shanghai. However, there was no growth from quarter to quarter. As a result, the impact of inflation may have contributed to the fourth quarter’s economic growth rate exceeding expectations.”
“Speaking of stimulus measures, we can only follow the old path this year,” said WANG DAN, chief economist at Hang Seng Bank in Shanghai.
“The most radical infrastructure plans are the ones that are proposed at the provincial level. Many central and western provinces, including Qinghai, Gansu, Ningxia, Hubei, and Hunan, will construct roads, railways, and other new infrastructure.
“The growth of the economy this year is definitely based on real estate. Already, income has decreased. Therefore, the real estate industry will be the focus of the stimulus this year.”
“The good news is that there are now signs of stabilisation, as policy support is showing up in the relative resilience of infrastructure investment and credit growth,” LOUISE LOO, senior economist, Oxford Economics. The good news is that in 2023, off-budget fiscal channels will continue to provide policy accommodation.
“It remains difficult to accurately gauge the shape of an eventual recovery,” the statement reads. “With incoming data in the next few months skewed by new year-related seasonalities.”
“Taking seasonality-related distortions into account, we believe that data could begin to surprise more broadly to the upside in March. Our expectation of a stronger sequential pick-up in growth from the current quarter is supported by the fact that high frequency indicators on mobility and traffic have shown signs of a tentative rebound.”
“The outcome supports our upward bias to rates and yields,” said Frances Cheung, rates strategist at OCBC Bank in Singapore. After initial issues with virus cases, the reopening will be viewed as beneficial to the economy. In the meantime, fiscal stimulus increases supply risk and boosts the economy simultaneously, arguing for higher CGB yields.”
“This was well above expectation; we had expected fourth-quarter GDP of 2.2%,” said WOEI CHEN HO, an economist at UOB in Singapore. Additionally, December data improved across all economic indicators. In general, this indicates that the recovery’s momentum will be greater in the first quarter of this year.”
“As the Chinese population attains herd immunity against COVID, which will paves the way for further normalization of activity and also a V-shaped recovery in private consumption,” “I think the recovery is likely to accelerate in the second quarter.”
“Given that the external outlook is still very cautious at this point due to recession risks in key developed markets,” “This pent-up demand will be strong and I think the key growth driver for China this year.”
“China’s economy probably reached its bottom in December,” stated ZHIWEI ZHANG, chief economist at Pinpoint Asset Management in Hong Kong. I wasn’t prepared for how quickly this first COVID-19 wave occurred. The peak of the first wave has probably already passed for many Chinese cities. In January, high-frequency indicators like the traffic congestion index experienced a sharp rebound. Consumption is also rising as mobility returns to normal.”
The population of China dropped for the first time since 1961. From here, the population is likely to decline in the coming years. With implications for domestic demand and potential growth, this is extremely significant. China’s structural economic growth cannot be driven by demographic dividend.”
Demographics will be a problem in the future. Productivity growth, which is influenced by government policies, will have a greater impact on economic growth.”
“The biggest surprise is the retail sales number, which is really a big beat… I would expect that retail sales could be a jump in the first quarter, and therefore, first-quarter GDP could also rise,” says IRIS PANG, Greater China Economist at ING in Hong Kong.
“However, COVID is just one part of China. We can probably say that it will end in 2023, but China will face a new challenge as a result of weak external demand. Because this is an external issue, monetary policy doesn’t really help; the only policy left is fiscal policy, and I anticipate strong support for infrastructure this year.
“China data came in less worse than expected across the board, reflecting less severe disruptions from the lockdown and massive infection,” stated KEN CHEUNG, CHIEF ASIAN FX STRATEGIST, MIZUHO BANK, Hong Kong.
“As attention has shifted to 2023 recovery, especially the data after the Chinese New Year break,” “the less worse-than-expected data did little to boost the RMB exchange rate.”
Given the COVID outbreak’s distortion and the larger statistical error in December data collection, investors may also be skeptical of the data.
“We believe that the impact of the data will be short-lived, and the RMB will be driven more by the movement of the USD in the near term,” reads the statement.
“In general, this is a positive GDP report, and it lays a solid ground for the economy to recover in the coming year,” says ZHOU HAO, chief economist at GUOTAI JUNAN International in Hong Kong. Since the reopening has been gaining momentum and the government will add more impetus to infrastructure investment, we believe that both consumption and investment will see further improvement over the next few quarters.”
“We see that the government will set the growth target at around 5% in March at the National People’s Congress, which seems pretty attainable for the time being.”
BACKGROUND:
* Reuters polled analysts and predicted that widespread COVID lockdowns and infections would slow China’s economic growth to 3.0% in 2022. However, after strict anti-virus restrictions were lifted in December, it is likely to rebound to 4.9% in 2023.
* Chinese leaders have promised to boost the world’s second-largest economy this year while addressing key growth inhibitors, particularly a severe downturn in the real estate industry. As the global economy teeters on the edge of recession, exports are also expected to remain weak, highlighting the significance of increasing domestic demand to propel a recovery in 2023.
* Despite a rise in infections, the sudden reversal of severe COVID-19 restrictions in China last month indicates a gradual recovery in consumption and economic activity this year. However, some indicators indicate that activity has not fully returned to pre-pandemic levels, let alone the levels of just a few months ago.
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