The real estate crisis, the industrial slowdown and the extremist sanitary measures were some conditioning factors for the recessive trend in the second largest economy in the world.
Xi Jinping‘s economy is the least successful since the launch of market reforms in China at the end of the 1970s.
The government confirmed that GDP grew only 2.9% at the end of 2022, a figure that does not it represents not even half of the goal set by the Communist Party Congress for that year.
Both the official figures from the National Statistical Office (NSO) of China and the own surveys of the IMF and the World Bank, all the reports confirm the same scenario: the second largest economy in the world abandoned the famous “Chinese rates” and now it grows at a rate similar to that of Europe.
Excluding unemployment in 2020 (overshadowed by the outbreak of the pandemic), China had not registered such a moderate level of growth since 1978, that is, at the beginning of the reform process carried out by Deng Xiaoping.
The dynamics of the economy is even worse if we consider the evolution of the last 3 months of last year.
The fourth quarter of 2022 registered zero growth compared to the previous period, monthly industrial production plummeted by 0.31% in November, and the retail sales index accumulates a fall of 2.8% since February of last year.
Although the accumulated growth for the year 2022 closed at 2.9%, this variation was mainly explained by the behavior of the first and third quarters, but not the second and fourth quarters.
The arrival of Xi Jinping to power represents a political setback even within an already dictatorial regime, but also a setback to the process of reform and market opening in the economy.
Although there is no question of going back on the reforms, the regime aborted the forward process, and instead is increasingly committed to typically Keynesian “demand policies”.
The China Central Economic Work Conference confirmed that Xi Jinping’s economic program will endorse an aggressive policy of fiscal expansion, which corresponds to a sustained deficit of 7% of GDP for the coming years.
The IMF estimates that the country’s financial deficit increased from 6.1% of GDP in 2021 to 8.9% of GDP in 2022, but this aggressive injection of spending did not translate into growth in real activity.
China’s deficit would be reduced to 7.08% of GDP by 2026, a path that guarantees the constant increase in the public debt ratio.
With information from La Derecha Diario