New Delhi: After suffering a deadly Covid wave and its devastating economic impact, China is set to return to the path of higher economic growth this year as consumer demand has gone up significantly in recent months, mostly due to higher domestic demands in the country. This is important as according to some estimates, due to its ‘Zero Covid Policy, China lost 5.6 per cent of its domestic demand between 2019 and 2020.
According to an estimate by Oxford Economics, the services sector has seen a sharp rebound in recent months as China recovered from the deadly Covid wave that engulfed the country after it ended its zero Covid policy in December last year. Services account for nearly 53 per cent of the Chinese economy and they have seen strong growth of 5.9 per cent in the first quarter of this year on a year-on-year basis.
Secondly, the strong performance of other sectors such as credit growth, developments in the property sector, and household spending has surprised several economists. In some cases, the performance of these sectors has outperformed already-frontloaded recovery expectations by experts. As a result, the Chinese economy is set to grow at a faster pace than previously anticipated.
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“Following Q1’s strong GDP, we upgraded our 2023 annual growth forecast by 0.5 percentage points to 5.5 per cent and our 2024 forecast by 0.3 percentage points to 4.6 per cent. The very decent start supports a more definitive rebound throughout the rest of this year,” Louise Loo, Lead Economist at Oxford Economics, said in a statement sent to ETV Bharat.
“Even if services' sequential growth were flat from hereon, half of China's economy would grow at above six per cent in 2023,” Loo said. The Chinese economy is set to maintain the growth momentum in the next year, too. Louise Loo said the think tank’s outlook for 2023 reflects the competing forces of a strong, organic post-reopening boost on one hand, and significant external and domestic economic headwinds on the other.
“Our quarterly growth profile reflects a strong start that eventually gives way to fading reopening tailwinds, but relatively easy macro and industry policies keep growth at a still-decent pace going into 2024,” noted the economist. However, there are risks to Chinese growth prospects, which are mostly fuelled by domestic demand as it may face an adverse impact, particularly in the country’s export sector, as the global economy is facing downtrends, particularly in the developed countries – the US and Europe.
Both the US and European economies are facing the recessionary pressures created by tight monetary policies as they grapple with high inflation. Moreover, the banking sector crisis in the US and Europe can have a spillover effect on the global economy with its impact being felt in India, China and Asia as well.
According to an estimate by the think tank, the world’s largest economy, the US is likely to enter recession in the second half of the year – July to December 2023 period, a factor that is likely to adversely affect other trading partners, including India and China. Despite the adverse global economic situation, according to different scenarios prepared by the economic think tank, China is set to witness higher economic growth than the official estimate of 5.5 per cent GDP growth in the current year.
