According to World Bank predictions, Covid-zero policies and the housing market crisis have caused China’s economic growth to lag behind that of the rest of Asia-Pacific for the first time in more than 30 years.
The US-based organization stated in a biannual report released on Tuesday that the region of East Asia and the Pacific’s annual growth outlook had been revised downward from 5 per cent to 3.2 per cent. However, since China accounts for 86 per cent of the region’s economic output, a large portion of that decline was caused by China’s economic problems.
The second-largest economy in the world, China, was predicted by the World Bank to grow by just 2.8 per cent in 2022, while the other 23 countries in the region were predicted to grow by an average of 5.3 per cent, which would be a greater increase than the 2.6 per cent growth in 2021.
For the first time since 1990, China’s GDP growth lagged behind that of its neighbors due to its divergent path.
According to the World Bank, the increase in Asia Pacific was being driven by high commodity prices and a post-pandemic recovery in domestic consumption. However, the World Bank reported that China’s strict adherence to its zero-Covid policy had disrupted industry as well as domestic sales and exports.
Conditions have gotten worse due to a crisis in China’s housing and real estate development industries. According to official statistics, new home prices in 70 Chinese cities fell by a worse-than-anticipated 1.3 per cent in August compared to the previous year, and almost a third of all property loans are now categorized as bad debts.
According to Chinese government statistics, the country’s annual GDP growth in 2021 was 8.1 per cent, the best figure in a decade, and 5.5 per cent was forecast for 2022.
Prior to Tuesday’s report, the World Bank had predicted a slowdown this year, with growth of only 5 per cent. The second-largest economy in the world was projected to grow by 4.5 per cent in 2023.
The twice-decade Party Congress, where the political elite are reshuffled around the various positions of power in the one-party state, is the most significant political event for the Chinese government and is just weeks away. Due to the increased political sensitivity, there have been no indications that the Covid regulations will be loosened as Leader Xi Jinping is expected to be reappointed for a record-breaking third term.
Tens or hundreds of millions of people are still subject to lockdowns or other restrictions as a result of the hardline policy, which has wreaked havoc on regional and national markets.
The OECD also predicted a slowdown in China to 3.2 per cent this year on Monday, but noted that “policy support could help growth recover in 2023.”
The Asian Development Bank cut its estimate for China’s growth in 2022 from 5 per cent in April to 3.3 per cent last week. Additionally, it was predicted that instead of growing by 4.8 per cent in 2023, China’s GDP would now only increase by 4.5 per cent.
“As they prepare for slowing global growth, countries should address domestic policy distortions that are an impediment to longer term development,” World Bank East Asia and Pacific vice-president Manuela Ferro in a statement.
(Adapted from TheGuardian.com)