China’s economic growth slowed to 5.2% in 2023, its second weakest expansion since 1990, as COVID outbreaks, a real estate crisis and lockdowns disrupted activity. While meeting the government’s annual target, doubts linger over the accuracy of the official data. As global demand weakens further in 2024, policymakers face an uphill battle to stabilize growth.
2023 Growth Hits 30-Year Low
China’s gross domestic product (GDP) grew 3% in the fourth quarter from a year earlier, according to government data released on January 17th [1]. That was below the 3.3% forecast in a Reuters poll and marked the worst performance since the second quarter of 2020.
For the full year, GDP expanded 5.2%, within the government’s target range of around 5.5% but still one of the weakest rates in decades [2].
| Key China Economic Indicators | 2022 | 2023 |
|---|---|---|
| GDP Growth | 3.0% | 5.2% |
| Retail Sales Growth | -0.7% | -0.2% |
| Urban Unemployment Rate | 5.5% | 5.5% |
| Exports Growth | 7.1% | 7.1% |
The government has been accelerating infrastructure spending and easing financing curbs on property developers to prop up the economy as consumption and exports weaken [3]. However, analysts warn the recovery remains fragile amid renewed COVID outbreaks and a global slowdown.
“The 5.2% growth rate belies weakness in the economy. If global demand weakens further, authorities will struggle to keep growth from sliding,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management [4].
Doubts Over Data Accuracy
The reliability of China’s GDP data has long been a source of debate among economists. The headline growth figures are widely considered overstated relative to the situation on the ground.
Independent analysis based on private data sources suggests actual expansion was closer to 2.2% in 2022 and 0.3% in 2023 [5]. The government statistics likely underestimate the depth of the current downturn.
“The official GDP figures should be treated with skepticism. Other economic indicators don’t support acceleration from 3% growth in 2022 to over 5% in 2023,” said Ting Lu, chief China economist at Nomura [6].
Global Headwinds Gather Strength
With demand slumping abroad, net exports subtracted from China’s official 2023 GDP growth instead of adding to it. Exports contracted 0.1% over the full year amid shrinking overseas orders [7].
The fallout from Russia’s war in Ukraine, elevated inflation and tighter monetary policies pushed the global economy to the brink of recession towards year-end. Further weakness in 2024 threatens to disrupt China’s exports and recovery.
“As the world economy slows, overseas appetite for Chinese goods will continue to drop,” said Zhaopeng Xing, China markets economist at ANZ Research [8].
Policy Support Insufficient
While infrastructure and property stimulus measures provided some lift, consumer and business confidence remained depressed by rigid pandemic restrictions through most of 2022.
Urban jobless rate ticked up to 5.5% in November and December, indicating brewing pressures in the labor market [9]. Shoppers also tightened their purse strings, with retail sales dropping 0.2% across 2023.
Analysts argue the government’s reluctant approach towards stimulus leaves the economy more vulnerable to external shocks.
“Lingering disruptions from COVID controls and limited policy support meant demand stayed unusually weak entering 2024,” said Louis Kuijs, head Of Asia economics at S&P Global Ratings [10].
Outlook Hinges on Reopening
Economists see growth stabilizing near 5% this year rather than accelerating. JPMorgan and Goldman Sachs both cut their 2024 GDP forecasts to around 4.7% following the latest data.
Support measures should check further declines, but a vigorous rebound depends on COVID restrictions being sustainably eased.
“Much hinges on the post-COVID consumption recovery. There are signs reopening could lift household spending, but execution risks abound,” said Ernan Cui, China consumer analyst at Gavekal Dragonomics [11].
If global demand falls more sharply, that would leave officials with little room to mount an overwhelming policy response. Already high debt levels may also curb their appetite for stimulus.
How Beijing manages these mounting headwinds will set the tone for China’s economic trajectory in coming years. The government faces pressure to balance virus containment with supporting fragile growth.
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