Pandemic factor finally lessening

CHINA - Report 08 Feb 2023 by FAN Gang and Chunyang Wang

The economy grew 2.9% y/y in Q4 2022, down from the 3.9% growth reported in Q3, and GDP grew 3% in 2022. A number of negative factors affected the economy in 2022, including global macroeconomic tightening, the Ukraine crisis, real estate restructuring and the pandemic management policies. In this quarterly forecast, we examine the effects of these phenomena and, particularly in light of the abolishment of the zero-COVID policy, project that the economy will begin to improve in 2023.

Industrial output rose 3.6% in 2022, down 6 pps from 2021. Investment rose 5.1%, up 0.2 pps, driven mainly by state investment. Consumption fell significantly, by -0.2% y/y, from 2021, down 12.7 pps, from repeated lockdowns.

Exports rose 10.5%, down 10.5 pps from 2021. Monthly growth rates of exports displayed a downward trend. Net exports’ contribution to GDP only accounted for 0.5 pps. Particularly in Q4 2022, the share of exports in accounting for GDP growth was only -1.2 pps, negatively impacted by weak global demand and the dramatic change in domestic COVID policy.

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