China would have the lowest GDP in four decades

China’s economic growth in 2022 is projected to be the weakest in four decades, after the crisis of the Covid-19 pandemic and that of the real estate sector, analysts indicated prior to the publication of the Gross Domestic Product (GDP) data. .

Ten experts consulted by AFP forecast a GDP expansion of 2.7% per year in the world’s second largest economy, a sharp drop of 8% compared to growth in 2021.

The figure would also be the lowest since the 1.6% contraction in 1976, the year of the death of former president Mao Zedong, not counting 2020, after the Covid-19 health emergency in Wuhan at the end of 2019.

Mandatory lockdowns, quarantines and mass testing led to the abrupt closure of factories and businesses in big cities like Zhengzhou, home to the largest iPhone factory, and reverberated throughout the global supply chain.

China eased pandemic restrictions in December, after three years of applying the world’s most written-in health measures. As a consequence, it is facing an uptick in infections that has overwhelmed its hospitals.

The situation would be reflected in fourth quarter growth, which will also be announced today along with other indicators such as industrial production and employment.

The fourth quarter is relatively difficult (…) It does not matter if it is by the metric of consumption or investment, growth is slowing down,” said Zhang Ming, an economist at the Chinese Academy of Social Sciences.

Chinese exports had their strongest decline since the start of the pandemic in December, with a contraction of 9.9% at an annual rate, while consumption reached negative figures in November and investment slowed down.

“Those three carriages (engines) of the Chinese economy face relatively evident downward pressure in the fourth quarter,” Zhang added.

Teeuwe Mevissen, an analyst at Rabobank, noted that the fourth quarter will surely show a decline due to the rapid spread of the virus.

“This will affect demand and supply conditions for the worse, the problems in the real estate sector also affect growth,” Mevissen said.

The real estate sector, which together with construction represents more than a quarter of GDP, has suffered since 2020, when the government applied a strong hand against excess credit and speculation.

This regulatory tightening marked the beginning of financial worries for Evergrande, a former Chinese real estate leader now saddled with massive debt.

Property sales have fallen in several cities and many developers are struggling to make ends meet.

However, the government seems to be taking a more conciliatory stance to revive this sector. Measures to promote “stable and healthy” development, with credit support for indebted developers and assistance for homebuyers, were announced in November.

“The transition phase may be difficult because the country would face a rebound in infections that will put pressure on the health sector,” warned Jing Liu, an HSBC analyst.