Economic activities in China are witnessing a remarkable expansion for the second month in a row, in an early indication that the country may get rid of the impact of restrictions imposed due to the outbreak of the “Covid-19” virus, and the “zero Covid” policy implemented by Beijing, sooner than expected.
Manufacturing performance indicators boomed at the fastest pace in more than a decade last February, and export orders expanded for the first time in nearly two years, the Wall Street Journal reported, citing the National Bureau of Statistics.
Indicators showed an increase in service and construction activity, while informal opinion polls revealed an improvement in demand, strength in pricing, employment, and supply chains, with confidence in the business sector at its highest level since March 2021.
export requests
Some economists believe that despite the sharp decline in economic activity in China during the last period, the indirect impact on the rest of Asia may be limited. The data shows that the index of new Chinese export orders rose in February 2023 to its highest level since May 2011, and other data from the region indicate that global demand for commodities continues to slow down, despite the recovery that China is currently witnessing.
Optimistic forecast
Tourism in Asia will not recover as quickly as the domestic travel sector in China, which has limited gains for countries such as Thailand and Japan, popular destinations among Chinese tourists. However, the improved outlook in China is expected to offset some of the calm in advanced economies, especially in the United States, as the Federal Reserve tries to contain high inflation without causing a recession.
In January, the International Monetary Fund raised growth forecasts for China to 5.2% in 2023, expecting the country to contribute to about a third of global growth this year. All this data supported the remarkable rises in Chinese stocks, as the “Hang Seng Index” in Hong Kong, which includes shares of some of the largest Chinese companies, closed up by 4.2%.
Support for policy makers
The latest data supports China’s top leaders who are gathering for the ruling party’s annual congress, to highlight economic growth away from the damage caused by the “zero Covid” policy.
The Chinese economy grew by 3% in 2022, one of the slowest rates in decades, as Chinese precautionary measures closed factories, led to a decline in home sales, and a collapse in consumer spending.
However, the new data strengthens the position of policy makers to raise their expectations for annual growth this year, which is seen as a major step to restore confidence in both the economy and the country’s leadership, especially since last year’s growth was less than the official target of 5.5% by a large margin.
real estate boom
There were also signs of a recovery in property demand, which had been mired in a years-long slump, after Beijing restricted lending to indebted developers.
“Real estate sales of the country’s 100 largest developers increased by 15% in February 2023 compared to the previous year,” said China Real Estate Information Corp., a data provider for the private sector.
In a related context, economists warned against reading too much in the February data, because it reflects one-time factors, such as the timing of the Lunar New Year holiday, and the “pent-up demand” emanating from the exit from the “zero Covid” controls in December 2022 and January 2023.
The chief Chinese economist at Macquarie Group, Larry Ho, predicted growth of 5.5% in 2023, and said: “While the Chinese economy is already recovering, it has not reached the point where growth of 6% will be guaranteed.”
Official figures – released earlier this week – raise fears that the scars of the “Covid-19” pandemic may deepen, while data from the National Bureau of Statistics show that the number of jobs in Chinese cities decreased for the first time in six decades last year.
Meanwhile, per capita disposable income is growing 2.9% in real terms, the second smallest annual increase since 1989.
