Growth in China under pressure despite a good 2021 vintage

Posted 17 January, 2022

Record growth for a decade but economy under pressure: if China announced on Monday a GDP up 8.1% in 2021, the Covid-19 is still weighing on the recovery of the Asian giant.

The country has largely recovered from the initial shock of the pandemic, but sporadic outbreaks continue to disrupt activity.

The "zero Covid" policy, which consists of doing everything to limit the occurrence of new cases as much as possible, made it possible to quickly stem the epidemic in 2020.

But it comes with a high social and economic cost. The service sector (leisure, tourism, hotel and catering, transport, etc.) has thus still not returned to its pre-pandemic level.

The recovery is also weakened by a surge in the price of raw materials and a crisis in real estate with the setbacks of the promoter Evergrande, on the verge of bankruptcy.

 

In a market in Beijing, January 17, 2022

In a market in Beijing, January 17, 2022 (Noel Celis / AFP)

 

The Chinese economy is facing "triple pressure", Ning Jizhe, an official with the National Bureau of Statistics (NBS), admitted to the press on Monday, referring to a contraction in demand, tensions in supply chains, and lowered economic objectives.

In this context, China nevertheless posted a growth of 8.1% last year. This is its fastest pace since 2012. Beijing had set itself the target of 6% growth for 2021.

A group of analysts polled by AFP expected an average increase of 8% in the gross domestic product (GDP) for 2021.
 

Omicron
 

In the fourth quarter, the growth of the Asian giant however lost steam (+4% year on year), after 4.9% in the previous one.

 

Arrival of travelers at Nanjing railway station in Jiangsu province, January 16, 2022

The arrival of travelers at Nanjing railway station in Jiangsu province on January 16, 2022 (STR/AFP)

 

In the first quarter, GDP still stood at 18.3%. A high rate is linked to the weak basis of comparison with the beginning of 2020 when the epidemic paralyzed activity.

From one quarter to another, GDP rose by 1.6%.

Although subject to caution, the official growth figure is still scrutinized, given the weight of China in the global economy. The country thus appears as a barometer of recovery.

In 2020, China was one of the few economies to post positive growth (+2.3%), when the Covid-19 struck down the rest of the world – this rate, however, was the weakest in four decades.

Retail sales, the main indicator of consumption, posted their worst performance in December (+1.7%) since the summer of 2020.

Industrial production, on the other hand, was stronger than expected last month, at +4.3% over one year.

After the appearance of several cases of Covid, three Chinese cities – some 20 million inhabitants – have been placed in quarantine in recent weeks. The highly contagious Omicron variant is singled out for a handful of cases.

 

Disinfection operation in Nanjing station, January 16, 2022

Disinfection operation in Nanjing station, January 16, 2022 (STR / AFP)

 

“This will considerably penalize the service sector, in particular consumption and transport,” warns analyst Yue Su, from the firm Economist Intelligence Unit (EIU).

Especially since the authorities are particularly on the alert as the Beijing Olympics approach (February 4 to 20) and the major Lunar New Year trips (February 1).

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