China Q4 GDP slows on COVID woes, but beats expectations

China Q4 GDP slows on COVID woes, but beats expectations
© Reuters.

By Ambar Warrick — The Chinese economy grew at a slower pace in the fourth quarter of 2022, data showed on Tuesday, as disruptions caused by the country’s now relaxed zero-COVID policy weighed heavily on business activity, although the reading still beat expectations.

Chinese gross domestic product (GPD) grew at an annualized rate of 2.9% in the three months to December 31, data from the National Bureau of Statistics showed. The reading was higher than expectations for growth of 1.8%, and down from the third quarter’s reading of 3.9%.

GDP was flat in the fourth quarter from the three months to September 31, ducking expectations for a 0.8% decline.

This brought China’s overall GDP in 2022 to 3%, lower than the 4.4% growth estimated by President Xi Jinping during his New Year’s address. It was also down significantly from the 8.1% growth seen in 2021.

China’s strict stance against COVID-19, which included strict quarantines and widespread curbs on movement and social activity, ground business activity to a halt in 2022. An indicator of overall business activity showed a contraction for all three months during the fourth quarter, as a string of new COVID-19 outbreaks saw the reintroduction of curbs in several economic hubs.

But slowing economic growth, coupled with increased public backlash against the COVID curbs, saw China begin relaxing its strict zero-COVID policy from December.

China reopened its international borders earlier in January for the first time in three years, marking a clear pivot away from the zero-COVID policy. Early indicators of road and air transport show that local activity and movement among citizens have already recovered sharply.

A decline in economic activity is now expected to have bottomed out during the quarter, with markets positioning for a strong recovery in the Chinese economy this year.

But given that the country is also facing its worst yet outbreak of the virus, the timeline for a full economic recovery in the country remains uncertain.

Still, Chinese stock markets have been on a tear since November, as traders bought into heavily-discounted stocks on the hope of an economic bounceback this year. The yuan also recovered sharply from a 14-year low hit during late-2022, and was trading at a near five-month high.