Image source: HstrongART, Peace-loving – Shutterstock
What's going on?
Data out on Tuesday showed that China’s economy expanded by 3% in 2022 – the slowest rate of growth, excluding the pandemic years, for nearly half a century.
What does this mean?
Spending most of 2022 cooped up in lockdowns meant that China was always going to have a tough time hitting its ambitious growth target of 5.5%. And let’s face it, the 3% that the country did achieve is pretty glacial by its own track record (tweet this). In fact, last year’s growth marked the first time in decades that the world as a whole outpaced China’s economic performance. But it’s not a total sob story: the country had a bit more pep in its step as the year drew to a close, and the fourth quarter’s growth actually outstripped economists’ predictions. So sure, Covid’s still a nuisance in China, but this weekend ushers in the year of the water rabbit, supposedly bringing patience and prosperity – so the country just might have luck on its side.
Why should I care?
Zooming out: See-saw.
Now that China’s reopening, there’s one worry niggling at economists’ minds: whether this move will help or hinder the fight against inflation. See, some experts think that a reopened, re-invigorated China will be extra-thirsty for resources like oil, sending prices skyward. But others point out that an unfettered China could lead to unclogged supply chains and free-flowing goods, easing price pressures instead. Time will tell which factor packs a bigger punch…
The bigger picture: Baby bust.
China’s one-child policy was scrapped in 2016, so you might expect the birth rate to be booming – especially given the boredom and pent-up energy that lockdowns entail. But China’s population actually fell for the first time in 60 years in 2022, and that’s a problem. Just ask Japan: now labeled “the land of the setting sun”, its slipping population has held economic growth back for a generation. Maybe it’s time for a three-child policy.
Originally posted as part of the Finimize daily email.
The top 2 financial news stories in 3 minutes. Join over one million Finimizers