China poised to announce economic comeback as zero-Covid era fades

Beijing: China is poised to announce an economic comeback on Tuesday, when Beijing unveils its first quarterly GDP numbers since removing growth-sapping Covid restrictions late last year, according to AFP.

The Asian giant’s viral containment programme – an unyielding regime of stringent quarantines, mass testing, and travel restrictions – severely hampered normal economic activity before being abruptly abandoned in December.

The data to be released on Tuesday will provide the first glimpse since 2019 of a Chinese economy free of public health restrictions, with economists polled by AFP anticipating an average of 3.8 per cent year-on-year growth from January to March.

However, the world’s second largest economy is nonetheless troubled by a slew of other difficulties, ranging from a debt-ridden property sector to dwindling consumer confidence, global inflation, and the possibility of recession overseas.

“The recovery is real, but still in its early stage,” said Larry Hu, chief China economist at the investment bank Macquarie, reported AFP.

Any rebound “will be gradual, largely due to the weak confidence” of consumers, which in turn makes companies “reluctant” to hire more staff, he said.

China’s economy grew by just three percent in the whole of last year, one of its weakest performances in decades.

It posted a 4.8 per cent expansion in the first quarter of 2022, though growth pulled back to just 2.9 per cent in the final three months of the year.

Property perils

A creeping crisis in the property sector — which together with construction accounts for around a quarter of China’s GDP — continues to “pose challenges to economic growth”, said Rabobank analyst Teeuwe Mevissen.

Real estate was a key driver of China’s recovery from the initial wave of the pandemic in 2020, when Beijing managed to stop the coronavirus from spreading widely.

But weak demand has since plagued a sector already afflicted by falling home prices and crippling debts that have left some developers struggling to survive.

The situation appears to have eased slightly in recent weeks as official support helped prices stabilise in March, according to figures released on Saturday by the National Bureau of Statistics.

Economists will also be watching keenly on Tuesday for March’s retail data, the main indicator of household consumption.

Retail sales finally ticked up in January and February following four successive months of contraction, according to official figures.

But nearly 60 per cent of urban households still prioritise saving money over investing or spending it, up from 45 per cent before the pandemic, according to a survey by China’s central bank.

Consumer confidence “remains well in negative territory” despite the heartening abolition of Beijing’s Covid curbs, said Harry Murphy Cruise, a macroeconomist focusing on the Asia-Pacific region at the ratings agency Moody’s.

“Households have long memories and will take time to forget the economic pain of recent years,” he told AFP.

Global tensions

Beijing has set a comparatively modest growth target of around five percent this year, a goal the country’s Premier Li Qiang has warned could be hard to achieve.

While many experts tend to take China’s official figures with a grain of salt, most expect Beijing to hit that mark.

According to an AFP poll, the Chinese economy will rise by an average of 5.3 per cent this year.

This corresponds to the International Monetary Fund’s prediction of 5.2 per cent.

Nonetheless, analysts cautioned that broader global trends could continue to weigh on China’s recovery.

Geopolitical tensions with the United States, the prospect of recession in other major economies, and skyrocketing worldwide inflation are among them.

With inputs from agencies

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