Next year, the Chinese economy will rebound faster

A faster and stronger recovery in growth is possible next year after China removes the last of its COVID curbs, economists say. Many businesses and analysts had not expected the government to ease restrictions for inbound travelers, including scrapping quarantine requirements from Jan, 8.

The fast reopening of the market has meant a heightened degree of uncertainty has been added to the already fragile economic outlook over the coming months. However, economists say it shortens the length of time that economic shocks last. During the Lunar New Year holiday, a period when production normally slows down, there is also a high probability that losses will also be concentrated in the months surrounding the holiday.

China’s Growth Slowdown

Since the government abruptly ended its Covid Zero policy a few weeks ago, analysts have already downgraded their growth forecasts for China this year and raised projections for 2023. Among economists surveyed by Bloomberg, growth is estimated to peter out at 3% in 2022, then rebound to 4.9% in 2023.

Bloomberg Economics’ Viewpoint

Growth could reach 6.3% in 2023, well ahead of our base case of 5.1%, due to the quicker reopening.

The global economy will reap mixed benefits from China’s reopening. Increasing Chinese tourism could significantly boost business in the service sector around the world if Chinese tourism recovers. There may be a greater need to ease supply-chain strains if business travel within and outside of China is smoother. There is no question that faster growth will result in stronger demand for commodities – which will counteract the expected slowdown in global inflation as a result of faster growth.

Given the very low levels of confidence in the business environment on the foreign market, foreign firms are proceeding cautiously with their investment and staffing plans for now.

There is a possibility that analysts will revise their forecasts again as a result of the recent scrapping of Covid curbs. The analyst at Natixis SA, Gary Ng, predicted a 3% growth rate in the second quarter through March, down from 3.5% this time last year.