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China’s economy expected to rebound as zero-Covid era fades

China is expected to announce an economic rebound on Tuesday when Beijing releases its first quarterly gross domestic product (GDP) figures since abolishing growth-sapping Covid-19 restrictions late in 2022.

The Asian giant’s virus containment policy – an unstinting regime of strict quarantines, mass testing and travel curbs – strongly constrained economic activity before it was abruptly ditched in December.

The disclosures on Tuesday will give the first snapshot since 2019 of a Chinese economy unencumbered by public health restrictions, with analysts polled by AFP expecting an average of 3.8 per cent year-on-year growth from January through March.

But the world’s No. 2 economy remains beset by other crises, from a debt-laden property sector and flagging consumer confidence to global inflation and the threat of recession elsewhere.

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

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

China’s economy grew by 3 per cent in 2022, 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.

A creeping crisis in the property sector – it and construction account 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-19 curbs, said Mr Harry Murphy Cruise, a macroeconomist focusing on the Asia-Pacific region at ratings agency Moody’s.

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

Beijing has set a comparatively modest growth target of around 5 per cent in 2023, 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.

An AFP analysts’ poll predicted that the Chinese economy would grow by an average of 5.3 per cent in 2023.

That is roughly in line with the International Monetary Fund’s forecast of 5.2 per cent.

Still, analysts warn that wider global trends could yet weigh on China’s recovery.

They include geopolitical tensions with the United States, the threat of recession in other major economies and galloping global inflation. AFP

Source: Straits Times