China’s heavy-handed implementation of zero-covid lockdowns over the past two-plus years has weighed heavily on its economy.
Now, its chaotic exit from those same zero-covid policies is delivering another economic blow, even as officials sound a bullish note for 2023.
Even though markets have been gunning for signs of new life in the Chinese economy, analysts say the hard reality is that recovery will take time.
Earlier this year, Beijing set a decidedly unambitious GDP growth target. At 5.5%, China’s GDP goal for 2022 was the lowest in three decades. Even that was essentially thrown out the window as the economic outlook grew ever gloomier. Meanwhile, the number of total working hours slumped; mass testing costs strained local government budgets; and widespread factory shutdowns snarled supply chains and fueled worker discontent.
Analysts, investors, and businesses grasped for signs from Beijing authorities of plans to reopen the economy and loosen pandemic restrictions. At the time, mere rumors of a zero-covid easing sparked market rallies to the tune of hundreds of billions of dollars.
Surging infections, plunging confidence
But any hopes of a sharp economic recovery for China as it pivots from zero-covid appear overly optimistic.
“It is unlikely we will see a V-shaped recovery,” notes China Charts, a newsletter. “Three years of lockdowns smothered the velocity of money and activity while shredding incomes and opportunities. You don’t get just to flip a switch and pick up where you left off.”
Data from a World Economics survey of sales managers in China suggest as much.
The London-based macroeconomic data provider canvassed sales managers from more than 2,300 companies between Dec. 1–16, and found their overall level of business confidence at the lowest since the monthly survey began in 2013. The index recorded a sharp drop to 48.1 in December, from 51.8 in November.
The survey “suggests strongly that the growth rate of the Chinese economy has slowed quite dramatically, and may be heading for recession in 2023,” World Economics noted. “The lights may not have gone out, but prospects for economic growth in 2023 have certainly dimmed.”