China’s Economic Growth Slows Down Due to Risks

China’s economy in 2022 could face some risks due to Covid-19 outbreaks, a hobbling real estate market, and government changes.

 

While China’s economy returned to pre-pandemic levels in 2021, businesses should be wary that the country’s GDP growth will decrease over the next few years. China also continues to face supply chain issues.

China still uses a “zero-Covid” strategy, imposing lockdowns and contact tracing, which has been difficult for the manufacturing industry. The strict quarantine mandates also continue to disrupt hotel operations, catering businesses and retail stores across the country.

China’s real estate sector is another factor to consider. When government efforts to douse an increasingly heated housing market backfired in 2020, real estate developers took a major hit. The crisis caused bottlenecks in China’s construction, home appliances, chemicals and metals industries well into 2021.

The current Sino-U.S. trade dispute is also troubling due to Chinese subsidies, intellectual property theft and current tensions in the relationship between countries. We expect existing political relations to remain strained between China, its Asian neighbors, and other countries unless they can level the playing field with a comprehensive trade agreement and de-escalate existing tensions at their borders.

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On a positive note, business investments will benefit from government incentives and fiscal policy will remain stable, minimizing the possibility of a sharp decline in economic growth.

We see an optimistic forecast for the food and pharma sectors. In addition, the outlook looks excellent for business with China’s agriculture and financial services sectors. But the outlook for construction, steel, metals and textiles is bleak. Businesses should stay vigilant and aware of these downside risks to China’s export performance. To learn more about these factors, read the full report here.