The pandemic took center stage in China in 2022, as the world’s second-largest economy struggled with COVID outbreaks and the economic fallout of widespread lockdowns. With restrictions lifted as of early December, China’s growth in 2023 will depend in large part on how the reopening progresses throughout the year, says Helen Qiao, Chief Greater China Economist and Head of Asia Economics Research for BofA Global Research.
Here, Qiao discusses what’s ahead for China’s reopening, its struggling property market, consumer demand and how China can overcome its challenges in the year ahead.
This interview took place on: November 30, 2022 (updated December 8, 2022)
Generally, what is your economic outlook for China in 2023, and why are you expecting above-consensus growth?
We’re forecasting 5.5% GDP growth for 2023, which is well above the consensus of 4.9%. One reason is that China’s sluggish pace of about 3% for 2022 creates a low hurdle for greater growth next year. A consumption-led recovery could actually be quite significant, as economic activities resume and more people leave their homes and travel to see their loved ones. There are bound to be challenges, but we expect substantial growth to resume by late in the second quarter, with the strongest rebound starting in the third.
China’s COVID-zero policies and restrictions captured global attention in 2022. How have they affected China’s economy and what is the likely path of reopening in 2023?
Those policies took an economic toll, for sure. COVID restrictions were especially confusing for small and medium-size companies, which had to pay rent and labor costs even when they couldn’t stay open. Job opportunities and incomes were deeply impacted, and service industries struggled at a time when people couldn’t dine out, travel or even go to the gym. Other countries experienced similar setbacks as COVID swept through earlier, and in 2022 the greatest impact was in China.
Now that reopening is underway, we expect to see economic recovery and growth gain momentum. Still, the way forward in China is probably going to be bumpy, with two steps forward and one step back, especially at the beginning. A negative shock to the economy could arise from fear of infections and from labor shortages as people are infected, rather than from lockdowns.