2024-01-17 04:40:07
China, weakened by a real estate crisis, saw its gross domestic product grow year-on-year in 2023 by 5.2%, its lowest rate since 1990, excluding the Covid period.
Published on: 01/17/2024 – 05:40
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In 2023, China experienced the weakest growth in three decades outside the Covid period, at a time when a real estate crisis and uncertainties are weakening the recovery for the second world power.
The Asian giant, penalized by three years of health restrictions against Covid, lifted these measures at the end of 2022, which largely allowed its economy to restart at the start of last year.
But the rebound has run out of steam and is running into several obstacles, including sluggish confidence among households and businesses, which is penalizing consumption. An unprecedented real estate crisis, record youth unemployment and the global slowdown are also hampering the traditional engines of Chinese growth.
In this context, the country nevertheless saw its gross domestic product (GDP) grow by 5.2% year-on-year in 2023, the National Bureau of Statistics (NBS) announced on Wednesday. This rate, which would be the envy of most major economies, nonetheless remains the lowest for China since 1990 (3.9%), excluding the Covid period.
“Disappointing recovery”
“Last year, China experienced the most disappointing recovery imaginable. But it is a recovery nonetheless,” notes analyst Shehzad Qazi of the China Beige Book research firm, stressing, however, that more robust support to activity will be necessary in 2024.
In 2023, “promoting the development” of the economy has been “an arduous task,” BNS official Kang Yi admitted to the press. In December, retail sales, a key indicator of household consumption, slowed down (+7.4% year-on-year), after a clear acceleration in November (+10.1%).
Analysts surveyed by the Bloomberg agency expected a faster pace (+ 8%). For its part, industrial production accelerated slightly in December (+6.8% year-on-year), after an increase of 6.6% a month earlier.
As for the unemployment rate, it increased slightly in December to 5.1%, compared to 5% in November. This figure, however, paints an incomplete picture of the situation, because it is only calculated for urban workers. It effectively excludes millions of migrant workers from rural areas, a population more vulnerable to the economic slowdown and whose situation is worsened by the real estate crisis. This sector has long represented in the broad sense more than a quarter of China’s GDP and constituted an important source of employment.
Delinquent real estate
Since 2020, real estate has suffered from a tightening by Beijing of the conditions of access to credit for real estate developers, in order to reduce their debt. The financial setbacks of emblematic groups (Evergrande, Country Garden, etc.) have since fueled buyers’ mistrust, against a backdrop of unfinished housing and falling prices per square meter. Beijing’s support measures for the sector have so far had little effect.
In December, China’s major cities again recorded a month-on-month decline in property prices, according to NBS figures. Out of 70 cities which make up the official reference indicator, 62 were thus concerned (compared to 33 in January 2023, a sign of deterioration of the situation).
“The fall is particularly significant” in small and medium-sized towns, analysts from the investment bank Goldman Sachs point out in a note. The purchase of property has long been seen by the Chinese as a safe investment for savings. The drop in the price of stone is a hard blow to their wallet.
Eminently political and subject to doubt, China’s official GDP figure nonetheless remains highly scrutinized, given the country’s weight in the world economy. This year, China is expected to see its GDP slow to 4.5%, according to World Bank forecasts. The government is due to announce the official target in March.
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