After the lifting of coronavirus restrictions in China at the end of 2022, at the beginning of this year, there has been a “strong start” for the Chinese economy, Olga Belenkaya, head of the macroeconomic analysis department at FG Finam, told Izvestiya on March 2. The expert explained how the Chinese economy manages to recover and how it will affect other countries.
The economist clarified that last year China’s GDP grew by only 3% against a target level of about 5.5%. Such an indicator was the worst result in almost half a century, excluding the general pandemic crisis of 2020, she added.
“The live data shows a strong start for the Chinese economy at the start of this year, after major anti-COVID restrictions were lifted in December last year that had hampered economic activity. First of all, restrictions on the mobility of the population, both within the country and in relation to the outside world,” the analyst noted.
According to her, the session of the National People’s Congress of China will open on March 5, at which it is expected to consider a report on the implementation of the country’s economic and social development plan for 2022 and draft economic and social development plans for 2023.
“According to Reuters, citing anonymous sources, very ambitious economic growth targets for this year are being discussed: 5-6%, while in November, before the lifting of anti-COVID restrictions, government economists proposed more moderate targets: 4.5-5. 5%,” said Belenkaya.
At the same time, the economist stressed that there are a number of problems that can hold back the growth of the Chinese economy. Among them, she named the crisis in the real estate market, the likely weakening of external demand due to the ongoing tightening of the monetary policy of world central banks, as well as weakened domestic demand.
“At the same time, the government and the central bank of China are pursuing an expansionary macroeconomic policy aimed at supporting domestic demand and stabilizing the real estate market. According to Reuters sources, the government is expected to increase the annual budget deficit to about 3% of GDP this year and issue special bonds worth about 4 trillion yuan to support investment spending, ”the expert said.
The analyst recalled that China is the second economy in the world, as well as the largest importer of many types of raw materials. She explained that the increase in demand from the PRC is a positive factor for world trade. In addition, the opening of the Chinese economy to international tourism means additional demand for services, including in the US and the eurozone.
“Therefore, the recovery of Chinese economic growth is important for the whole world as a factor that reduces the risks of a global recession, but at the same time, inflationary pressures may turn out to be more stable. For Russia, especially given the reorientation of foreign trade flows to the East, the growth of the Chinese economy means better prospects for demand for Russian raw materials exports,” Belenkaya concluded.
The day before the agency Bloomberg wrote that China is showing a strong recovery after the lifting of restrictions, and according to the National Bureau of Statistics of the PRC, the Manufacturing Purchasing Managers’ Index (PMI) rose last month to 52.6. The rate was the highest since April 2012.
On January 7, Finam IC Strategy Director Yaroslav Kabakov told Izvestiya that in cases where the Chinese economy falls by 1%, the world economy shrinks by about half a percent. According to him, in 2023 the opposite effect will be observed, and the country’s economic growth will be characterized by a weaker first half of the year and a stronger second.
