Chinese economy closed 2022 in recession and increase in COVID cases

Official data over the weekend showed the decline in manufacturing worsened last month, while activity in the service sector plunged to a record since February 2020.

On the other hand, a survey of companies by China Beige Book International published on Monday suggests that the economy contracted in the fourth quarter of the previous year.

China’s abrupt abandonment of strict COVID controls in December led to a spike in infections in major cities, prompting people to stay home when they fell ill or feared becoming infected.

While the outbreak has likely peaked in places like Beijing, and economic activity is starting to pick up there, the virus continues to spread rapidly across the country. A likely rush of travel during the upcoming Lunar New Year holidays could cause cases to spread to rural areas, disrupting activity in the first quarter.

The lifting of the COVID restrictions came at a time when the economy was already pretty weak. COVID restrictions had driven consumer and business confidence to record lows, the housing market is in a record slump and foreign appetite for Chinese goods has plummeted.

A private PMI survey to be released on Tuesday is also likely to confirm the worsening decline in December. The Caixin manufacturing index likely fell from 49.4 to 49 in November, according to economists surveyed by Bloomberg.

Economists expect China’s economy to have grown just 3% in 2022. China Beige Book, an independent data provider, said its surveys suggest the economy grew just 2% last year.

Economists project the possibility of a faster and stronger rebound later in 2023. After the likely slow start in the January-March period, growth is projected to rise to 4.8% for the year, based on the median estimate. of economists surveyed by Bloomberg.

Original Note: China’s Economy Ends Year in Slump as COVID Infections Surge