China is experiencing some of the weakest growth in three decades

China announced on Wednesday January 17 a 5.2% increase in its economic growth in 2023, the lowest rate for the Asian giant in three decades excluding the Covid period. Beijing had set itself a target of “around 5%”, after a 3% increase in its gross domestic product (GDP) in 2022, at a time when a real estate crisis, sluggish consumption and uncertainties are penalizing the recovery in the second largest economic power in the world.

In 2023, China experienced the weakest growth in three decades outside the Covid period, at a time when a real estate crisis and uncertainties are weakening the recovery for the second world power. The Asian giant, penalized by three years of health restrictions against Covid, lifted these measures at the end of 2022, which largely allowed its economy to restart at the start of last year. But the rebound has run out of steam and is running into several obstacles, including sluggish confidence among households and businesses, which is penalizing consumption. An unprecedented real estate crisis, record youth unemployment and the global slowdown are also hampering the traditional engines of Chinese growth.

In this context, the country nevertheless saw its gross domestic product (GDP) grow by 5.2% year-on-year in 2023, the National Bureau of Statistics (NBS) announced on Wednesday. This rate, which would be the envy of most major economic powers, nonetheless remains the lowest for China since 1990 (3.9%), excluding the Covid period. A group of economists interviewed by AFP had anticipated this growth rate on Monday (5.2%), a figure that Chinese Prime Minister Li Qiang confirmed on Tuesday at the Davos Forum (Switzerland). On the other hand, between the third and fourth quarters, a comparison more faithful to the economic situation, the pace is much more modest (1%).

In 2023, “promoting the development” of the economy was “an arduous task,” BNS official Kang Yi told the press. In December, retail sales, the main indicator of household spending, slowed down (7.4% year-on-year), after a clear acceleration in November (10.1%). Analysts surveyed by the Bloomberg agency expected a faster pace (8%). For its part, industrial production accelerated slightly in December (6.8% over one year), after an increase of 6.6% a month earlier.

As for the unemployment rate, it increased slightly in December to 5.1%, compared to 5% in November. This figure, however, paints an incomplete picture of the situation, because it is only calculated for urban workers. It effectively excludes millions of migrant workers from rural areas, a population more vulnerable to the economic slowdown and whose situation is worsened by the real estate crisis.

This sector has long represented in the broad sense more than a quarter of China's GDP and constituted an important source of employment. Since 2020, real estate has suffered from a tightening by Beijing of the conditions of access to credit for real estate developers, in order to reduce their debt. The financial setbacks of emblematic groups (Evergrande, Country Garden, etc.) have since fueled buyers' mistrust, against a backdrop of unfinished housing and falling prices per square meter. Beijing's support measures for the sector have so far had little effect. “Firmer support for developers could allay concerns” about their financial health and restart this crucial sector, Michelle Lam, economist for the Société Générale bank, told AFP.

Eminently political and subject to doubt, China's official GDP figure nonetheless remains highly scrutinized, given the country's weight in the world economy. “Official data highlights how the fourth quarter of 2023 was better than that of 2022, but the economy was faltering until the end of the year,” notes analyst Shehzad Qazi, of the research firm China Beige Book. “Last year, China experienced the most disappointing recovery imaginable. But it is nevertheless a recovery,” he concedes, adding that more robust support for the economy will be necessary in 2024. This year, China should see its GDP slow to 4.5%, according to forecasts. of the World Bank.

The government will have to “strengthen its support” for growth, in particular through “fiscal measures to support investment”, estimates Brian Coulton, economist for the Fitch rating agency, to AFP. The group of experts interviewed by AFP expect 4.7% growth. The government is due to announce the official target in March.