Covid-zero policies and the housing market crisis have put China’s economic growth behind the rest of the Asia-Pacific region for the first time in more than 30 years, according to World Bank forecasts.
In a semi-annual report released on Tuesday, the US-based institution said the annual growth outlook for East Asia and the Pacific region had been revised down from 5% to 3.2%. . However, much of this decline is due to economic difficulties in China, which constitutes 86% of the region’s economic output.
The World Bank predicts GDP growth in China – the world’s second largest economy – of just 2.8% for 2022, while the rest of the 23-nation region is expected to grow by 5.3% on average, more than double the 2.6% rise from 2021. China’s divergent trajectory has put its GDP growth behind its neighbors for the first time since 1990.
The World Bank said high commodity prices and a post-pandemic rebound in domestic consumption were behind the rise in Asia-Pacific. But China’s strict commitment to its zero Covid policy has disrupted the industry as well as domestic sales and exports, the World Bank said.
A crisis in China’s housing and property development sectors has also worsened conditions. In August, new home prices in 70 Chinese cities fell 1.3% year-on-year, worse than expected, according to official figures, and nearly a third of all home loans are now classified as bad debt.
In 2021, Chinese government figures put its annual GDP growth at 8.1% – the country’s best in a decade, and projected 5.5% for 2022. This year, the World Bank had forecast a slowdown, with a growth of only 5%, until Tuesday’s report reduced it. Even further. For 2023, the world’s second largest economy has recorded growth of 4.5%.
China’s government is just weeks away from its most important political event, the twice-decade-long Party Congress, where the political elite is shuffled around the various positions of power in the one-party state. . Leader Xi Jinping is set to be reappointed for an unprecedented third term, and with heightened political sensitivity there have been no signs of the Covid rules easing. The hardline policy continues to see tens or hundreds of millions of people under lockdown or other restrictions at any one time, and has ravaged local and national markets.
On Monday, the OECD also predicted a Chinese slowdown to 3.2% this year, “but policy support could help growth recover in 2023.”
Last week, the Asian Development Bank also lowered its growth forecast for China in 2022, from 5% in April to 3.3%. He also predicted that China’s GDP in 2023 would only grow by 4.5% instead of 4.8%.
“As they prepare for slowing global growth, countries should address domestic policy distortions that are hampering longer-term development,” said the World Bank’s Vice President for Asia. East and Pacific, Manuela Ferro, in a statement.
Reuters contributed to this report