Monday 17 January 2022
Omicron triggers new concerns
China surprises in 2021 with strong growth
Especially at the beginning of last year, Chinese economic growth is picking up speed. However, this also decreases again – there are several reasons for this. Economists are now predicting a year with significantly less momentum.
China’s economy grew strongly last year – but growth slowed down significantly towards the end of the year. Data from the Chinese Bureau of Statistics showed GDP growth of 8.1 percent for 2021 compared to the previous year. In the fourth quarter, however, growth was only four percent compared to the same quarter of the previous year. Statistics Bureau spokesman Ning Jizhe warned that “the domestic economy is under the triple pressure of a demand slump, a supply shock and weakening expectations.”
The strong increase over the year can be explained above all by the low basis for comparison due to the pandemic in the previous year. With a zero-Covid strategy, mass testing, quarantines and entry restrictions, the most populous country got the virus under control faster than most other states
For the year as a whole, industrial production in China grew by 9.6 percent. In December it was officially only 4.3 percent – but analysts had expected a stronger slump in growth. Chinese retail, which is seen as a symbol of consumption, recorded a growth of only 1.7 percent in December compared to 3.9 percent in November.
China has been grappling with a spate of local lockdowns amid coronavirus outbreaks of late. In addition, there were power outages in important industrial regions due to energy shortages. In addition, the country has seen a slump in the important real estate market in recent months – symbolized by the problems of the real estate developer Evergrande. Regulatory measures also hampered growth in other sectors such as the internet economy. These effects were particularly felt in the second half of the year.
The strong annual growth in 2021 is still the best value since 2012. The Chinese economy thus clearly exceeded the target of six percent set by the leadership in Beijing. In the first quarter in particular, the economy grew significantly after the virus-related decline in 2020 and recorded an increase of 18.3 percent. However, after China’s economy caught up again in the further course of the pandemic year 2020 and in the end was one of the few economies worldwide to record growth of 2.3 percent, growth in the other quarters of 2021 was weaker in comparison.
China relies on tough lockdowns
The further course of the pandemic is likely to be decisive for economic development this year. As countries around the world have begun to live with the coronavirus, Beijing is going into lockdown more than ever. Nationwide, only around 150 cases were reported daily – in a country with 1.4 billion people. According to official information, the variant was first discovered in China last week. Experts fear that there could be serious consequences for China’s economic development if there were lockdowns in many regions nationwide because of the Omicron variant, which would interrupt supply chains and paralyze factories.
The US investment bank Goldman Sachs warned that a large omicron eruption could have serious consequences for the economy in China – and last week cut its forecast for China’s growth to 4.3 percent in the current year. The World Bank also recently reduced its forecast from 5.3 to 5.1 percent. Chinese economists from the Academy of Social Sciences (CASS) proposed a growth target of “more than five percent” for this year to the government in December.