Health relaxations in China will hit growth

The possible reopening may bring inflationary problems to China, with an increase in demand, especially accelerated household consumption, in addition to the short-term interruption of labor supply, production and supply chains.

Bruce Pang, chief economist at Jones Lang Lasalle.

China’s abandonment of tough anti-Covid-19 policies, promising to spur an economic recovery next year, is likely to depress growth for months to come as infections rise, economists say. rebound will not occur until later in the year.

There are already signs of a revival in demand for travel and other services, but China’s fragile health system and low vaccination rates leave China ill-prepared for a major wave of infections, which could trigger labor shortages and consumers even more suspicious.

Some economists downgraded growth forecasts for the world’s second-largest economy early next year, continuing this year’s dismal growth numbers, which are among the worst in half a century.

While long-term confidence in the recovery remains intact, the reopening of the economy may also trigger inflation, which has so far remained relatively contained in China despite rising prices in other major economies.

“Compared to other developed countries, China’s medical resources are somewhat insufficient,” said Nie Wen, an economist at the Hwabao Trust, which has cut its first-quarter growth forecast for China to 3.5-4% from 5% previously. .

The Trust has warned of the risk of Covid-19 outbreaks when China celebrates Lunar New Year in January, a very popular time to travel for the country’s 1.4 billion people.

China’s economy grew just 3% in the first three quarters of this year, but top policymakers are expected to aim higher at the annual meeting next week: government advisers told Reuters last month, It would forecast 2023 growth targets of 4.5-5.5%, while a central bank adviser said China should target no less than 5%.

The low growth registered this year, although partly due to the collapse of the domestic property market and the slowdown of the global economy, has also been largely blamed on the harsh restrictions imposed by China in relation to Covid-19.