The world’s second-largest economy is slow to restart after Zero-COVID policies slowed it down significantly.
Key Details
- China’s targeted growth for this year has somewhat disappointed analysts and investors who were looking for insight into how President Xi Jinping would guide China’s economy in the coming year.
- Lower projections could mean the Chinese economy could slow global GDP in 2023.
- China’s legislature met in its largely ceremonial National Peoples Congress over the weekend, where officials revealed the target GDP growth is about 5%.
- Some had expected Chinese officials to announce stimulus packages during the congress, but no announcement came.
- Last year, China did not reach its target growth of 5.5%. At 3%, it had its slowest growth rate since 1976.
Why it’s news
As the world’s second-largest economy, China’s slower growth could have effects on the global markets. President Xi’s extended presidential term has been marked by his intention to bring China to a new level of power despite challenging economic conditions.
However, China’s economy has struggled as it recovers from pandemic-related difficulties and now faces geopolitical tensions with Western countries. Within its own borders, it also struggles with falling demographics and a falling housing market.
This year’s less ambitious and ambiguous GDP goal could result from China missing its target last year. However, economists worry that a global recession will occur this year without China’s economy rising.
Backing up a bit
China remains the largest nation by population and the second-largest economy (behind the U.S.) and has had steady GDP growth over the past few decades. It is a manufacturing giant, and now, with the recent end of Zero-COVID policies, it is likely to see an economic turnaround.
But as a nation, China is facing challenges on multiple fronts. Earlier this year, China’s National Bureau of Statistics announced the first population decline since the Great Leap Forward.
Though now mainly lifted, China’s Zero-COVID policies brought parts of the nation to a grinding halt, affecting its overall economy. Adding on growing tension with the U.S., internal turmoil and protests, and tension with Taiwan, China has many difficulties to address.
China’s economy is under growing pressure, and investors fleeing the nation alongside manufacturers could spell trouble for its overall economy.