Solid export growth provided a strong boost to the Chinese economy during 2021 and most of 2022, with net exports contributing 1.0 percentage point to growth in the first nine months of 2022.
But with the global environment souring amid a global economic slowdown, there will be a rotation of growth drivers from exports to household consumption as China moves rapidly toward reopening in 2023, projected French credit insurer Coface.
Investment (42% of GDP) will likely maintain a stable contribution as the real estate sector is expected to stabilize, while manufacturing growth and infrastructure investment slow slightly, Coface added.
During 2022, this country’s GDP grew 3.0% annually, the lowest increase in four decades excluding 2020, and below the official target of 5.5% for that year.
This slowdown stemmed from the strict zero-tolerance policy for Covid-19, which led to partial closures of industrial centers in 2022, such as Shenzhen and Shanghai.
This policy also generated a drop in domestic demand and affected global supply chains.
Chinese economy
In particular, according to references from Mexico’s Ministry of Finance and Public Credit (SHCP), the performance of the Chinese economy was affected in retail sales, which contracted 1.0% during 2022, while industrial production increased 3.2% annually, much lower than the 6.8% observed in 2021.
On the other hand, the construction sector, equivalent to 7% of GDP, registered growth of just 2.0% per year in 2022 due to the deleveraging policy implemented by the Chinese government since 2020 in order to reduce speculative bubbles in the real estate sector.
In order to lessen the impact of this sector on the economy, the government implemented public financing measures for infrastructure projects and its central bank maintained an accommodative monetary policy to support the economic recovery.
PMI
On December 7, 2022, the government announced the relaxation of its zero-tolerance policies, thereby reducing some of the social distancing measures.
As a result, in January and February 2023, China’s composite PMI was above the expansion threshold, after three months in contraction, supported by the recovery of the services and manufacturing sectors, while retail sales and industrial production recorded annual growth for the January-February period of 3.5 and 2.4%, respectively, up from the previous December of -1.8 and 1.3%, in the same order.
