Current:Home > StocksWith COVID lockdowns lifted, China says it's back in business. But it's not so easy -FundTrack
With COVID lockdowns lifted, China says it's back in business. But it's not so easy
View
Date:2025-04-13 21:34:17
China is emerging from nearly three years of self-imposed isolation, which has been a drag on the world's second-largest economy.
Earlier this month, Chinese officials reported 3% economic growth in 2022 — the second-lowest in at least four decades.
But now that stringent COVID-19 lockdowns have been lifted, officials say the country is back in business. Analysts, however, say it won't be easy.
Here is why.
"Trust but verify"
China has been trying to woo back foreign investors and businesses after nearly three years of disrupted supply chains, delayed logistics, stringent regulation on sectors ranging from consumer technology to property, and onerous lockdowns that shuttered factories.
"More focus will be placed on expanding domestic demand, keeping supply chains stable, supporting the private sector, reforming the state-owned enterprises, attracting foreign investment and preventing economic and financial risks," Liu He, the country's vice premier and one of its top economic policymakers, reassured business elite gathered at Davos in Switzerland earlier this month.
Understandably, some remain skeptical.
"Trust but verify," advises Nargiza Salidjanova, a China director at the research firm Rhodium Group.
She says China-watchers are still waiting to see more substantial pro-business policy changes, such as giving private and foreign firms equal access in technology and certain industrial sectors and reducing tariffs on imported goods.
"It is not enough to talk about these things," she says. "The message and the practice of it has to really align to strongly encourage foreign investors."
Salidjanova points to the official 3% GDP growth figure for 2022, despite repeated lockdowns and supply chain disruptions. "The market didn't believe the numbers. That's not very encouraging. The first step is to actually start releasing accurate numbers so investors can trust you again."
A quick economic recovery will hinge on domestic consumption
Adding to China's challenges are bigger global economic uncertainties — just as China finally reopens its borders.
China weathered the pandemic well — at first. "In 2020, China was up and running with manufacturing again. Nobody else was. So exports really drove the recovery in China, the first recovery in China," says Bert Hofman, a professor at the National University of Singapore and a former China director for the World Bank.
But 2023 is different, says Hofman. "The world economy is not doing so well and therefore export demand will be lackluster at best," he says.
In the U.S., for example, central bankers are working to put off a recession and cool high inflation.
So, given a weaker global economic outlook, China's recovery will be more reliant on getting its own citizens to spend more.
And that is the tricky bit.
"It really has to come from the consumer in terms of, you know, are people going to be willing to dine out? Are they willing to spend on entertainment and leisure goods? Are they willing to return to China's malls and markets and kind of lend support to the retail environment?" says Nick Marro, a senior analyst with the Economist Intelligence Unit research firm.
Marro believes there will be some pent-up consumer demand as China gets over a massive surge in COVID cases later this year. Chinese consumers plowed their somewhat diminished incomes into savings during the pandemic, and so now they do have a bit more to spend.
However, they're also risk-averse and sensitive to any perception that China could reverse course on public health policy and economic reopening again, Marro says. "We are expecting this consumer recovery to be really drawn out."
COVID remains a potential wild card
Of course, COVID-19 still remains a variable. It's a potential X-factor that could continue to jeopardize China's economic recovery, in addition to its public health system.
"Part of the equation for how long that immunity [to the current COVID strain] lasts is how quickly the virus is evolving," says Lauren Ancel Meyers, a professor at the Center for Pandemic Decision Science at the University of Texas.
She says: "What is the next variant that's going to emerge and spread over the world? How similar does it look to the current spreading variants and the vaccines that they use to vaccinate people?"
China's public health authorities say 80% of the country — more than 1.1 billion people — has already been infected with COVID in this most recent surge.
Such a rapid and wide-scale level of infection may result in a decent amount of natural immunity. But China's economy is far from being immune to further shocks.
veryGood! (83)
Related
- Hackers hit Rhode Island benefits system in major cyberattack. Personal data could be released soon
- The 26 Words That Made The Internet What It Is (Encore)
- Alyson Stoner Says They Were Fired from Children’s Show After Coming Out as Queer
- Disgraced FTX founder Sam Bankman-Fried has another big problem: He won't shut up
- Biden administration makes final diplomatic push for stability across a turbulent Mideast
- Kareem Abdul-Jabbar: There are times when you don't have any choice but to speak the truth
- Kelly Clarkson Shares Insight Into Life With Her Little Entertainers River and Remy
- Citing an ‘Imminent’ Health Threat, the EPA Orders Temporary Shut Down of St. Croix Oil Refinery
- Federal Spending Freeze Could Have Widespread Impact on Environment, Emergency Management
- Mod Sun Appears to Reference Avril Lavigne Relationship After Her Breakup With Tyga
Ranking
- Man can't find second winning lottery ticket, sues over $394 million jackpot, lawsuit says
- Catholic Bishops in the US Largely Ignore the Pope’s Concern About Climate Change, a New Study Finds
- Kidnapping of Louisiana mom foiled by gut instinct of off-duty sheriff's deputy
- As Big Energy Gains, Can Europe’s Community Renewables Compete?
- Jamie Foxx gets stitches after a glass is thrown at him during dinner in Beverly Hills
- Despite high inflation, Americans are spending like crazy — and it's kind of puzzling
- Say Bonjour to Selena Gomez's Photo Diary From Paris
- How (and why) Gov. Ron DeSantis took control over Disney World's special district
Recommendation
$73.5M beach replenishment project starts in January at Jersey Shore
Suspect wanted for 4 murders in Georgia killed in standoff with police
The Enigmatic ‘Climate Chancellor’ Pulls Off a Grand Finale
Hollywood's Black List (Classic)
What were Tom Selleck's juicy final 'Blue Bloods' words in Reagan family
Eli Lilly cuts the price of insulin, capping drug at $35 per month out-of-pocket
How to file your tax returns: 6 things you should know this year
Suspect wanted for 4 murders in Georgia killed in standoff with police