Chinas 2022 economic growth one of worst on record, post-pandemic policy faces test

Published

3 years ago

January 17, 2023

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BEIJING Chinas economic growth in 2022 slumped to one of its worst levels in nearly half a century as the fourth quarter was hit hard by stringent Covid-19 curbs and a property market slump, raising pressure on policymakers to unveil more stimulus this year.

The quarterly growth and some of the December indicators such as retail sales beat market expectations, but analysts noted that the overall economic impulse across China remained weak and highlighted the challenges facing Beijing after it abruptly dropped its zero-Covid policy last month.

Gross domestic product (GDP) grew 2.9 per cent in the October-to-December period from a year earlier, data from the National Bureau of Statistics (NBS) showed on Tuesday, slower than the third quarters 3.9 per cent pace. The rate still exceeded the second quarters 0.4 per cent expansion and market expectations of a 1.8 per cent gain.

Beijings sudden relaxation of stringent anti-virus measures has boosted expectations of an economic revival this year, but it has also led to a sharp rise in Covid-19 cases that economists say might hamper near-term growth. A property slump and weak global demand also mean a rebound in growth will be heavily reliant on shell-shocked consumers.

Chinas 2023 will be bumpy; not only will it have to navigate the threat of new Covid-19 waves, but the countrys worsening residential property market and weak global demand for its exports will also be significant brakes, Mr Harry Murphy Cruise, an economist at Moodys Analytics, said in a note.

For 2022, GDP expanded 3 per cent, badly missing the official target of around 5.5 per cent and braking sharply from the 8.4 per cent growth in 2021. Excluding the 2.2 per cent expansion after the initial Covid-19 wave hit in 2020, it is the worst showing since 1976 the final year of the decade-long Cultural Revolution that wrecked the economy.

Asian shares dropped after the Chinese data, while the renminbi skidded to a one-week low.

Activity data in December surprised broadly to the upside but remains weak, particularly across demand-side segments such as retail spending, Ms Louise Loo, a senior economist at Oxford Economics, said in a note.

(The) data so far supports our long-held view that Chinas reopening boost will be somewhat anaemic at the beginning, with consumer spending being a key laggard in the initial stages.

A Reuters poll forecast growth to rebound to 4.9 per cent in 2023 as Chinese leaders move to tackle some key drags on growth the zero-Covid policy and a severe property sector downturn. Most economists expect growth to pick up in the second quarter.

On a quarterly basis, GDP stalled, coming in at zero growth in the fourth quarter, compared with growth of 3.9 per cent in July to September, highlighting underlying weakness across many sectors.

Beijings lifting of Covid-19 curbs has seen businesses struggling with surging infections, suggesting a bumpy recovery in the near term.

The ongoing exit wave on the back of Chinas faster-than-expected reopening has taken a heavy toll on economic activity in recent months due to surging infections, a temporary labour shortage and supply chain disruptions, economists at Goldman Sachs said, noting the annual contractions in output of both steel products and cement in December.

Factory output grew 1.3 per cent in December from a year earlier, slowing from the 2.2 per cent rise in November, while retail sales, a key gauge of consumption, shrank 1.8 per cent last month, extending Novembers 5.9 per cent drop. More On This Topic Chinas population shrinks for first time in over 60 years Chinas boost for flagging world economy looms as reopening starts Chinas top leaders have pledged to prioritise consumption expansion to support domestic demand and the broad economy this year, at a time when local exporters struggle in the wake of global recession risks. The central bank is also expected to steadily ease policy this year.

China is likely to aim for economic growth of at least 5 per cent in 2023 to keep a lid on unemployment, policy sources said.

Chinas property industry was among the biggest drags on growth. Investment in the sector fell 10 per cent year on year in 2022, the first decline since records began in 1999, and property sales slumped the most since 1992, NBS data showed, suggesting that government support measures were having minimal impact so far.

The authorities have rolled out a flurry of support policies targeting home buyers and property developers in recent weeks to relieve a long-running liquidity squeeze that has hit developers and delayed the completion of many housing projects.

Adding to the challenges facing the economy and the government, Chinas population in 2022 fell for the first time since 1961, the NBS data showed, a historic turn that is expected to mark the start of a long period of decline in its citizen numbers and see India become the worlds most populous nation in 2023.

The population will likely trend down from here in the coming years. This is very important, with implications for potential growth and domestic demand, said Pinpoint Asset Management chief economist Zhang Zhiwei.

Going forward, demographics will be a headwind. Economic growth will have to depend more on productivity growth, which is driven by government policies. REUTERS More On This Topic China exports and imports tumble sharply in December, cloud 2023 growth outlook Xis plan to reset Chinas economy and win back friends

Business

Surprise rise in inflation as summer travel pushes up air fares

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1 hour ago

August 20, 2025

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Surprise rise in inflation as summer travel pushes up air fares

Prices in the UK rose even faster than expected last month, reaching the highest level in 18 months, according to official figures.

Inflation hit 3.8% in July, data from the Office for National Statistics (ONS) showed.

Not since January 2024 have prices risen as fast.

It’s up from 3.6% in June and is anticipated to reach 4% by the end of the year.

Economists polled by Reuters had only been expecting a 3.6% rise.

More unwelcome news is contained elsewhere in the ONS’s data.

Train tickets

Another metric of inflation used by government to set rail fare rises, the retail price index, came in at 4.8%.

It means train tickets could go up 5.8% next year, depending on how the government calculate the increase.

This year, the rise was one percentage point above the retail price index measure of inflation.

These regulated fares account for about half of rail journeys.

Why?

Inflation rose so much due to higher transport costs, mostly from air fares due to the school holidays, as well as from fuel and food.

Petrol and diesel were more expensive in July this year compared to last, which made journeys pricier.

Coffee, orange juice, meat and chocolate were among the items with the highest price rises, the ONS said. It contributed to food inflation of 4.9%.

What does it mean for interest rates?

Another measure of inflation that’s closely watched by rate setters at the Bank of England rose above expectations.

Core inflation – which measures price rises without volatile food and energy costs – rose to 3.8%. It had been forecast to remain at 3.7%.

It’s not good news for interest rates and for anyone looking to refix their mortgage, as the Bank’s target for inflation is 2%.

Whether or not there’ll be another cut this year is hotly debated, but at present, traders expect no more this year, according to data from the London Stock Exchange Group (LSEG).

Economists at Capital Economics anticipate a cut in November, while the National Institute of Economic and Social Research (NIESR) expect one more by the end of the year.

Analysts at Pantheon Macroeconomics forecast no change in the base interest rate.

Political response

Responding to the news, Chancellor Rachel Reeves said:

“We have taken the decisions needed to stabilise the public finances, and we’re a long way from the double-digit inflation we saw under the previous government, but there’s more to do to ease the cost of living.”

Shadow chancellor and Conservative Mel Stride said, “Labour’s choices to tax jobs and ramp up borrowing are pushing up costs and stoking inflation. And the Chancellor is gearing up to do it all over again in the autumn.”

Business

AI ‘immune system’ Phoebe lands backing from Google arm

Published

4 hours ago

August 20, 2025

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AI 'immune system' Phoebe lands backing from Google arm

An AI start-up which claims to act as an ‘immune system’ for software has landed $17m (£12.6m) in initial funding from backers including the ventures arm of Alphabet-owned Google.

Sky News has learnt that Phoebe, which uses AI agents to continuously monitor and respond to live system data in order to identify and fix software glitches, will announce this week one of the largest seed funding rounds for a UK-based company this year.

The funding is led by GV – formerly Google Ventures – and Cherry Ventures, and will be announced to coincide with the public launch of Phoebe’s platform.

It is expected to be announced publicly on Thursday.

Phoebe was founded by Matt Henderson and James Summerfield, the former chief executive and chief information officer of Stripe Europe, last year.

The duo sold their first start-up, Rangespan, to Google a decade earlier.

Their latest venture is motivated by data suggesting that the world’s roughly 40 million software developers spend up to 30% of their time reacting to bugs and errors.

Financial losses to companies from software outages are said to have reached $400bn globally last year, according to the company.

Phoebe’s swarms of AI agents sift through siloed data to identify errors in real time, which it says reduces the time it takes to resolve them by up to 90%.

“High-severity incidents can make or break big customer relationships, and numerous smaller problems drain engineering productivity,” Mr Henderson said.

“Software monitoring tools exist, but they aren’t very intelligent and require people to spend a lot of time working out what is wrong and what to do about it.”

The backing from blue-chip investors such as GV and Cherry Ventures underlines the level of interest in AI-powered software remediation businesses.

Roni Hiranand, an executive at GV, said: “AI has transformed how code is written, but software reliability has not kept pace.

“Phoebe is building a missing layer of contextual intelligence that can help both human and AI engineers avoid software failures.

“We love the boldness of the team’s vision for a software immune system that pre-emptively fixes problems.”

Phoebe has signed up customers including Trainline, the rail booking app.

Jay Davies, head of engineering for reliability and operations at Trainline, said Phoebe had “already had a real impact on how we investigate and remediate incidents”.

“Work that used to take us hours to piece together can now take minutes and that matters when you’re running critical services at our scale.”

Entertainment

Paul Weller suing former accountants after they stopped working with him over Gaza statements

Published

4 hours ago

August 20, 2025

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Paul Weller suing former accountants after they stopped working with him over Gaza statements

Paul Weller is suing his former accountants after they stopped working with him after he alleged Israel was committing genocide in Gaza, according to a legal letter.

The former frontman of The Jam, 67, has filed a discrimination claim against Harris and Trotter after the firm ended their professional relationship.

Lawyers for Weller say the singer-songwriter was told in March that the accountants and tax advisers would no longer work with him or his companies.

According to the letter, which was seen by the PA news agency, a WhatsApp message from a partner at the firm said: “It’s well known what your political views are in relation to Israel, the Palestinians and Gaza, but we as a firm are offended at the assertions that Israel is committing any type of genocide.

“Everyone is entitled to their own views, but you are alleging such anti-Israel views that we as a firm with Jewish roots and many Jewish partners are not prepared to work with someone who holds these views.”

Israel has vehemently denied claims of genocide.

But lawyers for Weller claim by ending their services, the firm unlawfully discriminated against the singer’s protected philosophical beliefs, including that Israel is committing genocide in Gaza and Palestine should be recognised as a nation state.

Weller said: “I’ve always spoken out against injustice, whether it’s apartheid, ethnic cleansing, or genocide. What’s happening to the Palestinian people in Gaza is a humanitarian catastrophe.

“I believe they have the right to self-determination, dignity, and protection under international law, and I believe Israel is committing genocide against them. That must be called out.

“Silencing those who speak this truth is not just censorship – it’s complicity.

“I’m taking legal action not just for myself, but to help ensure that others are not similarly punished for expressing their beliefs about the rights of the Palestinian people.”

The legal letter says Weller will donate any damages he receives to humanitarian relief efforts in Gaza.

Cormac McDonough, a lawyer at Hodge Jones and Allen, which is representing Weller, said his case “reflects a wider pattern of attempts to silence artists and public figures who speak out in support of Palestinian rights”.

Mr McDonough added: “Within the music industry especially, we are seeing increasing efforts to marginalise those who express solidarity with the people of Gaza.”

Sky News has contacted Harris and Trotter for comment.