On Breakingviews: China's economy grew 3% in 2022, beating forecasts but way below target. Ending consumption-suppressing policies removes drags on growth. But with fiscal coffers low and inflation rising, Beijing is short on stimulus tools, says ywchen1
A vendor sells Chinese Lunar New Year decorations at an outdoor market in Beijing, China January 13, 2023. REUTERS/Tingshu Wang3% in 2022, the government reported, beating forecasts but way below the official 5% target. Ending consumption-suppressing policies is removing drags on growth, but with fiscal coffers low, and debt and inflation rising, China is short on tools to drive growth.
The surprising lift is largely thanks to a rosier-than-expected fourth quarter, when the country took a ride on a pandemic-policy rollercoaster. As the contagious Omicron strain spread through cities, local officials’ first reaction was to tighten lockdowns, which suppressed consumption. Then Beijing abruptly scrapped its zero-Covid mandate, which wound down quarantine but also unleashed a massive outbreak. A Peking University study estimated roughly 900 million had been infected as of Jan. 11.
Regardless, the chaotic end of quarantine coincided with other easing measures, including the softening of crackdowns on real estate developers and private technology giants, respectively, which set the basis for a recovery in 2023. But it will take more than removing hobbles to get China out of the basement. The property market, which drives a quarter of output, is still falling; official data showed investment in the sector fell 10% last year, the first decline since records began in 1999.
Analysts polled by Reuters had expected GDP to expand 2.8% in 2022. The Chinese government had set the official annual GDP target at "around" 5.5% in March.
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