As China steps away from Zero Covid, what will the economy look like in 2023?

Hong Kong
CNN
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Such as China Closer than ever to full exposure after three years of government-imposed Covid isolation and reintegration with the world, the economic outlook is high.

Beijing last axis of its aggressive “zero covid” strategy – which it was long choker Business – it is expected that Vital pumping In the second largest economy in the world next year.

Coronavirus lockdowns and border restrictions have left China out of sync with the rest of the world, disrupting supply chains and hurting the flow of trade and investment.

And with the global economy now facing significant challenges, including energy shortages, slowing growth and soaring inflation, reopening China could provide a much-needed and timely boost.

But the reopening process is likely to be erratic and painful, according to economists, with country economy Its in for a bumpy ride in the first few months of 2023.

China Historic property retreat and a Possible global recession They added that this could cause more headaches in the new year.

“In the short term, I think the Chinese economy is more likely to see a mess than a rally for one simple reason: China is not ready to deal with Covid,” said Bo Zhuang, senior sovereign analyst at Loomis, Sales & Company, a Boston firm. based investment company.

For nearly three years, China has adhered to a zero-tolerance approach to the virus, even though the policy has caused unprecedented economic damage and widespread frustration. In 2022, growth slowed down sharply The company’s profits collapsedand youth unemployment Climb to record levels.

Center Growing public unrest And the financial stressSuddenly, the government changed course This month, and virtually abandoning Zero-Covid.

While the easing of restrictions is a long-awaited relief for many, the suddenness of it has caught the unprepared public by surprise and left them largely disillusioned. They defend themselves.

“In the initial stage, I think reopening may unleash a wave of COVID cases that could overwhelm the health care system, dampening consumption and production in the process,” Zhuang said.

Indeed, the rapid spread of infection has driven many people indoors, emptying shops and restaurants. Factories and companies They have also been forced to stop or cut production because more workers are getting sick.

“Living with Covid will be more difficult than many people think,” said analysts from Capital Economics.

They expect the Chinese economy to contract by 0.8% in the first quarter of 2023, before rebounding in the second quarter.

Other experts also expect the economy to recover after March. In a recent research report, HSBC economists expected a contraction of 0.5% in the first quarter, but growth of 5% overall for 2023.

China’s haphazard reopening is not the only factor weighing on the economy. In 2023, experts will continue to watch how policymakers try to fix the country’s ailing real estate sector, which accounts for nearly 30% of GDP.

The crisis in the industry – which began in late 2021 when several high-profile developers She defaulted on her debts Delayed or halted construction of previously sold homes across the country. raised it Rare protest by homebuyers this year, who refused to pay mortgages on unfinished homes.

While Beijing achieved series of attempts To save the sector – including the unveiling 16-point plan Last month to ease the credit crunch – the statistics still paint a bleak picture.

Real estate sales by value fell more than 26% in the first 11 months of this year. Investment in the sector decreased by 9.8%.

At a major political meeting earlier this month, senior leaders He pledged to focus on boosting the economy In the next year, indicating that they will introduce new measures that improve the financial situation of the real estate sector and enhance market confidence.

“The measures announced so far are not enough to achieve a turnaround, but policymakers have indicated that more support is on the way,” Capital Economics analysts said.

“This should reassure homebuyers enough to raise sales perhaps before the middle of next year.”

Possible global recession It is another major concern that will shape China’s economic landscape in 2023.

Trade was Powered Much of China’s economic growth earlier this year, as exports were boosted by higher prices for the country’s goods and a weaker currency.

But in recent months, the trade sector — which makes up about a fifth of China’s GDP and provides 180 million jobs — has begun to show cracks from the global economic slowdown.

Last month, China’s outbound shipments shrank 8.7% from a year earlier, much worse than October’s 0.3% decline. That was the worst performance since February 2020, when the Chinese economy Almost reached a dead end amid the initial coronavirus outbreak.

Countries around the world are facing recession as policymakers continue to raise interest rates to combat rising inflation.

“[China’s] “Exports have already reflected a lot of the pandemic-era boom,” Capital Economics analysts said.

“But the looming global recession means they are likely to have more downside over the next few quarters.”