China sees one of its worst years of growth since 1990
Recovery stalls amid sluggish consumption and global economic turmoil
BEIJING: China’s economy last year grew at one of its slowest rates in more than three decades, official figures showed Wednesday, as it was battered by a crippling property crisis, sluggish consumption and global turmoil.
The figures were in line with expectations and even beat Beijing’s target but will likely pile fresh pressure on officials to unveil more stimulus measures to kickstart business activity and get the country’s army of consumers spending again. China’s National Bureau of Statistics revealed that gross domestic product expanded 5.2 percent to hit 126 trillion yuan ($17.6 trillion) last year.
Markets in Asia fell on the news, with Hong Kong’s exchange closing down 3.7 percent and Shanghai off more than two percent. The reading is better than the three percent recorded in 2022, when strict zero-COVID curbs destroyed activity, but marks the weakest performance since 1990, excluding the pandemic years. While 5.2 percent would be looked on enviously by other governments such as the United States and those in the eurozone—which each expanded around two percent in 2022 -- it is well down from the levels around six or seven percent enjoyed in the 2010s.
After lifting its draconian COVID measures at the end of 2022, Beijing set itself a growth target of “around five percent” for last year. The economy enjoyed an initial post-pandemic rebound, but ran out of steam within months as a lack of confidence among households and businesses hit consumption. “With investment in the property sector falling, the economy is more dependent on the manufacturing sector and service sector,” Zhiwei Zhang, President and Chief Economist at Pinpoint Asset Management, said in a note.
And Teeuwe Mevissen, China economist at Rabobank, told AFP: “The main challenges for China continued to be the malfunctioning real estate sector and related to its low levels of private consumption.”
Statistics last month showed deflation continued for the third month in a row, likely deepening consumer reluctance to spend. And exports, historically a key growth driver, fell last year for the first time since 2016, reflecting how tensions with the United States and a stuttering global economic recovery are compounding Beijing’s struggles to kickstart growth at home.
China’s GDP figures remain a key source of insight into the health of the world’s second-largest economy, despite being eminently political. Officials are due to release their growth target for 2024 in March. Between the third and fourth quarters—figures more reflective of the real-time economic situation—it only grew one percent.
And December saw retail sales—a key indicator of household spending—slow after a rebound the previous month. Unemployment also increased slightly to 5.1 percent—though the statistics effectively exclude millions of migrant workers from rural areas. Official statistics also showed China’s population decline accelerated in 2023, extending a downward streak after more than six decades of growth as the country battles a looming demographic crisis.
“What China saw last year was possibly the most disappointing post-COVID recovery imaginable,” Shehzad Qazi, managing director of China Beige Book, a consultancy firm that tracks the Chinese economy, told AFP. “The economy limped to calendar’s end,” he said.
“Any true acceleration next year will require either a major global upside surprise or more active government policy.” Chaoping Zhu, at JP Morgan Asset Management, added: “Stronger fiscal stimulus are essential to support growth and market confidence.”
Weighed down by a lack of business confidence and sluggish consumption, China has sought to lure back international investors. Speaking at the annual meeting of global elites in Davos on Tuesday, Premier Li Qiang painted a bullish picture of the economy. “Choosing the Chinese market is not a risk but an opportunity,” Li said. But risks abound, most prominently in the country’s teetering real estate market, which has long accounted for around a quarter of China’s economy and experienced dazzling growth for two decades.
Financial woes at major firms such as Evergrande and Country Garden are now fuelling buyer mistrust against a backdrop of unfinished housing developments and falling prices. Property was for years seen by many Chinese as a safe place to park savings, but price drops have hit their wallets hard and Beijing’s support measures for the sector have so far had little effect. Also weighing down the economy is a lack of jobs for the country’s youth. A record of more than one in five people aged 16 to 24 in China were unemployed in May, according to officials. Beijing then suspended the monthly publication of youth unemployment figures in August. But it shared on-year figures on Wednesday, saying the unemployment rate of 16 to 24 year-olds—excluding students—was 14.9 percent in 2023.