China’s fourth-quarter GDP, released a few weeks ago, showed a return to growth. The IMF raised its growth forecast (Wow), a decrease of nearly one percentage point (y/y) compared to October. Nonetheless, the level of GDP will be broadly in line with expectations in the April report.
figure 1: China real GDP index, Q1 2013=1 (bold black), IMF WEO January 2023 updated forecast (sky blue triangle), IMF WEO April 2022 forecast (tan triangle), and Goldman Sachs 1/29 Forecast (pink triangle). Real GDP Index = 1 calculated by accumulating growth rates at 1Q13 levels. Source: Investing.com, IMF WEO (January 2023April 2022), Goldman Sachs (1/29/2023), and authors’ calculations.
The upward revision to the growth rate for 2023 is mainly due to the lifting of Covid restrictions. This seems to be in line with most forecasts I’ve seen for the Chinese economy, with some emphasizing that most people will be infected and have some immunity, and then encouraging a resumption of consumption. Liquidity indicators through mid-January support this view. Other observers (eg, Paulson Institute) said that given previous post-reopening patterns, the recovery would be very fast in the first quarter and then much slower (“square root”).
