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Zero COVID and global slowdown hurt China’s economy


BEIJING — Analysts say that China’s economic activity keeps getting bad numbers because of the global slowdown and the strict zero-COVID policy, which China doesn’t seem to be giving up.

In the world’s second-largest economy, exports, producer prices, and manufacturing activity have all been down in recent days.

Even Chinese billionaires are having a hard time. According to a ranking made by the Hurun firm, the number of Chinese billionaires has dropped the most in 24 years.

Many analysts think that the slowing economy around the world is to blame for the drop in exports, which used to be one of the main ways China grew.

Erin Xin, a China economist for HSBC, said in a note, “Monetary conditions are quickly getting more complicated in other countries, while inflation remains high due to high energy costs.”

She thinks that the national economy will have to take over because “global demand is slowing down,”, especially for clothes and electronics.

Iris Pang, the chief economist for China at ING, worries that the poor health of exports will hurt manufacturing and jobs.

She says that there is a chance of deflation, which is a general and long-term drop in consumer prices.


In addition to these outside factors, China’s economy is also being hurt by something that is unique to the country: Beijing’s refusal to give up on its “zero COVID” policy, which involves repeated confinements and transportation restrictions when the number of cases goes up.

What makes it hard for consumers and businesses to trust

Economists at the Japanese bank Nomura did some math on Monday and found that health restrictions affect a part of China that makes up more than 12% of the country’s GDP.

Still, it doesn’t look like anything will change soon.

This weekend, health officials made it clear that the “unwavering” zero COVID policy would stay in place.

And Li Qiang, who was in charge of the long lockdown in Shanghai in the spring, was just given a reward by being moved up in the Communist Party to number two, right behind President Xi Jinping.

Larry Hu and Yuxiao Zhang, economists at Macquarie, say, “Given how much political capital leaders have put into the great campaign for zero COVID, it is unlikely that they will just stop it all of a sudden in the near future.”

“Zero COVID and real estate are two problems that the Chinese economy will have to deal with this year,” they say.

About a quarter of China’s GDP comes from construction and real estate, but many developers are now in so much debt that they can’t pay their bills. Some buyers are angry that construction sites have stopped moving, so they have decided to stop paying back.

Real estate crisis

Beijing wants growth of about 5.5% this year, but many economists no longer believe it, even though the GDP numbers for the third quarter were a pleasant surprise (+3.9%).

But some people hope that things will get better.

So, HSBC economists say, “remain positive about China.” They expect the country to grow by more than 5% next year.

This number will be the result of comparing it to this weaker year, as well as “a gradual refinement and relaxation of certain anti-COVID restrictions by China in 2023, a stabilization of the housing market, and the continuation of policies that support it.”

Some people don’t feel this way. Analysts from Macquarie told AFP that “the slowdown in the world economy” will cause Chinese exports to drop by 5% in 2023.

“In China right now, the risk of deflation is higher than the risk of inflation,” they say. They expect “more easing measures in the future,” especially a drop in the liquidity rate that investors have to pay. banks in China.


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