China’s economy grew 5.2% in 2023, meeting the government’s target despite repeated COVID-19 outbreaks and a real estate crisis that hampered growth in the second-largest economy. The country’s gross domestic product expanded 2.9% in the October-December period from a year earlier, down from 3.9% growth in the third quarter, according to government data released on January 17th.
Q4 Growth Slows but Hits Annual Target
The Q4 GDP growth of 2.9% was slightly below expectations of a 3.0% increase, according to a Reuters poll of analysts. For the full year of 2023, GDP grew 5.2%, within the government’s target range of around 5.5% [1].
While the annual target was achieved, growth was still among the weakest in nearly half a century, as repeated COVID outbreaks and lockdowns along with a property market slump took a heavy toll. The government recently abandoned its strict zero-COVID policy amid signs the economy was struggling.
Premier Li Keqiang stated at the World Economic Forum in Davos that China’s economy “overcame multiple challenges” in 2023 and remained “resilient and vital” [2]. However, many analysts believe growth could weaken further this year without more stimulus.
Table 1 summarizes the key GDP figures:
| Metric | Q4 2022 | 2023 |
|---|---|---|
| GDP Growth | 2.9% | 5.2% |
| Retail Sales Growth | 1.8% | < 0% |
| Industrial Output Growth | 1.3% | 3.6% |
| Fixed Asset Investment Growth | 5.1% | 5.0% |
| Surveyed Jobless Rate | 5.5% | 5.5% |
Table 1: Key figures from China’s Q4 and 2023 GDP report. Retail sales contracted in 2023 for the first time on record [1].
Uneven Recovery Ahead
Economists predict China’s recovery will be uneven and bumpy after the abrupt U-turn in COVID policies in December 2022. Growth is expected to pick up later this year as consumption rebounds, but challenges around unemployment, property defaults, and local government finances persist [3].
“The Chinese economy still faces multiple risks and challenges this year – the foundation for economic stabilization and recovery is not yet solid,” said Fu Linghui, spokesman for the National Bureau of Statistics.
Premier Li stated that uncertainties remain high regarding the global economy and emphasized the need to prepare for “worst case scenarios.” He reaffirmed China’s commitment to further opening up and welcomed foreign investors to share development opportunities [4].
Julian Evans-Pritchard, senior China economist at Capital Economics, said:
“The worst is behind us, but the recovery will be bumpy. The surge in COVID cases after the abrupt end of zero-COVID rules will hamper consumer spending and labor supply in the near-term.”
He projects growth will pick up later this year on stronger infrastructure spending by local governments. But full normalization of consumption will take more time due to lingering health fears and household balance sheet damage.
Policy Support Expected in 2024
Economists widely expect China will roll out more policy stimulus this year to stabilize growth near the 5-5.5% target range. Steps could include [5]:
- Infrastructure spending: Funds for roads, rail, utilities to boost investment
- Tax cuts: VAT and income tax reductions to ease corporate burdens
- Monetary easing: Cut rates, lower reserve requirements to boost lending
However, analysts say policies will likely be more restrained than past stimulus programs due to high debt levels and property excesses.
“Beijing’s policy support may be more symbolic than substantive until late 2024 or 2025,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
Overall, China enters 2024 on steadier footing after meeting its 2023 GDP target. But economists stress that sustained recovery depends on COVID normalization and reviving consumption amid global uncertainties. Expect a bumpy path with targeted stimulus to stabilize near 5-5.5% growth this year.
References
[1] China Q4 GDP grows less than expected at 5.2%, beats 2023 target
[2] In Davos, Chinese Premier takes aim at trade barriers
[3] China’s recovery set to slow, bumpy amid uncertainties: analysts
[4] China will become ‘more competitive’ down the road, economist Xie says
[5] China’s long to-do list to boost the economy in 2024
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