China’s economy is going through one of its most uncertain phases amid a surge in Covid cases. On one hand economic activities have slumped and on the other there has been a rise in unemployment. The government’s data indicated that Beijing’s healthcare spending increased 15 per cent in the January-November period as it followed a zero Covid policy with stringent PCR testing across the country and quarantine facilities.
“The problem is that after all that now there is a surge in Covid cases which has led to panic. People are scared and are resorting to saving up every penny amid uncertainty,” a person who has business links in China told India Narrative.
Though Beijing has been taking steps including offering tax cuts to support its economy, these have yielded little results while pushing debt levels further.
For Beijing the biggest challenge in 2023 will be to put growth back on track.
The World Bank further reduced China’s growth projections to 2.7 per cent this year. It noted that China’s economic activity continues to track the ups and downs of the pandemic—outbreaks and growth slowdowns have been followed by uneven recoveries. For 2023, the World Bank projected a 4.3 per cent growth.
The multilateral agency further said that China’s growth outlook is subject to significant risks, stemming from the uncertain trajectory of the pandemic, of how policies evolve in response to the Covid situation, and the behavioural responses of households and businesses. Besides, the stress in the real estate sector could also dampen the situation.
The government’s fiscal spendings surpassed revenue by Rmb7.8 trillion ($1.1 trillion) in the first 11 months of the year—more than double compared to the same period previous year when the figure was just Rmb 3.7 trillion.
According to the Financial Times, Zhong Zhengsheng, chief economist at Ping An Securities in Beijing, said China’s fiscal outlay would fall 12 per cent in December following many months of increases and that the authorities will have to cut down on spending.