Smokestacks of “world’s workshop” cooling, with China’s economy growing mere 3% in 2022

Posted on : 2023-01-18 16:28 KST Modified on : 2023-01-18 16:28 KST
The number was around half of what Beijing had projected, and brings China closer to the global average
Workers watch cranes in action at a construction site in Beijing, China, on Jan. 12. (Reuters/Yonhap)
Workers watch cranes in action at a construction site in Beijing, China, on Jan. 12. (Reuters/Yonhap)

China’s GDP grew by 3.0% last year, or about half the government’s goal of 5.5% announced at the start of 2022.

The Chinese economy, which has a great direct impact on the Korean economy, will likely slosh around a great deal in the short term depending on the country’s COVID-19 situation and other factors.

During a press conference Tuesday morning, China’s National Bureau of Statistics announced that China’s economic growth rate in 2022 was 3.0%.

This was higher than the foreign press and experts’ projection (2.7%), but far lower than the 5.5% goal announced by China’s State Council last March.

The National Bureau of Statistics also revealed that China’s economy grew 2.9% in the fourth quarter of last year.

China’s economy grew 2.2% in 2020, the first year of the COVID-19 pandemic, and rebounded to 8.4% growth in 2021, reflecting the low-base effect from the previous year.

China’s 3.0% growth rate last year was the country’s second lowest figure since 1976, when the social chaos of the Cultural Revolution ended.

Only 2020, when the country took a direct hit from COVID-19, was worse.

After 1990, when China’s economy grew by a mere 3.9% due to international sanctions in the wake of the government’s suppression of the Tiananmen Square protests, the Chinese economy experienced high-speed growth of 7%-14% per year during the 1990s and 2000s.

The growth rate slowed entering the 2010s, but it remained in the 6%-9% range.

This means the “workshop of the world” and driving force leading global economic growth since the 2000s, now has a growth rate more or less similar to the world average.

The World Bank recently estimated that the global economy grew by 2.9% in 2020.

If Chinese economic growth remains at its current level, Korea’s economy will take a major hit, and it will have a fundamental impact on the strategic competition between the United States and China as well.

The decisive factor that slowed the Chinese economy was its "zero-COVID" policy.

For close to three years, China maintained a strict quarantine policy that tolerated not even a single confirmed case of COVID-19, switching to a “living with COVID-19” footing only at the end of last year.

The zero-COVID policy propped up the Chinese economy in 2020 and 2021, but last year, it had a major negative effect.

In particular, the authorities put Shanghai — China's biggest commercial city with a population of 24 million — under complete lockdown from April to June, while locking down the rest of the country for long periods of time as well, including major cities like the capital Beijing, Guangzhou, Chongqing, Chengdu and Wuhan.

This has led incomes to fall and consumption to contract.

Youth unemployment has skyrocketed, with 17%-18% of people between the ages of 16 and 24 unemployed as of late last year.

The transfer of production facilities by major global corporations like Apple — which have taken a major hit due to the spread of COVID-19 in China — to places such as India and Southeast Asia is a major concern, as is US efforts to contain China by hindering its high-tech sector, including semiconductors.

Predictions of China’s economic growth this year differ wildly from agency to agency, ranging from low 4% to mid 5%.

Global investment banks hoping for a Chinese economic recovery predict a growth rate in the 5% range, while the steely-eyed World Bank and IMF forecast a growth rate in the early-to-mid 4% range.

Inevitably, China’s growth rate this year will, in the short term, be impacted by how the COVID-19 pandemic unfolds in the country.

Predicting China’s economic situation this year, the Financial Times of the UK wrote late last month, “China is facing a bleak ending to 2022; the opening from its “zero-Covid” policy will sadly claim many more lives yet and is overwhelming hospitals, as the pandemic did elsewhere in 2020-21. But a lot can and will change over the course of the year.”

The Chinese government is strongly determined to stimulate the economy.

In fact, Beijing has some room to play with monetary policy as far as prices and interest rates are concerned.

However, the COVID-19 situation is still fluid, and a new, fatal strain could emerge.

Whether local consumption revives is also key.

Chinese household bank savings grew by 18 trillion renminbi last year.

This means people delayed consumption due to insecurity about COVID-19 and the economic outlook.

By Choi Hyun-june, Beijing correspondent

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