BEIJING, China—China’s economy expanded at its fastest pace for 10 years in 2021, according to an AFP poll of analysts, but its strong recovery from the COVID-19 pandemic is threatened by Omicron and a property sector slowdown.
The eight percent growth would be well above the government’s target of more than six percent, and comes on the back of a strong start to the year as a “zero-COVID” policy allowed the country to lead the global economic recovery.
China’s exports surged nearly 30 percent last year on solid global demand as countries reopened from pandemic lockdowns, boosting its stuttering economy.
But the country’s recovery in the second half of 2021 was hobbled by a series of outbreaks—with officials reimposing strict containment measures—as well as power outages caused by an emissions-reduction drive, supply chain problems and surging energy costs.
While the forecast marks a healthy annual tick—up from 2.3 percent in 2020—those issues put a dampener on factory activity and led to businesses shuttering.
They were compounded by a crackdown on debt in the property sector, which accounts for a huge part of the economy.
“Key factors… were the impact of power shortages, the residential construction sector slowdown and moderating retail sales,” said Rajiv Biswas, Asia-Pacific chief economist at IHS Markit.
The analysts tipped growth of just 3.5 percent on-year for the fourth quarter, down from 4.9 percent the previous three months and 7.9 percent from April-June.
And headwinds from the construction sector slowdown, as well as the impact of COVID measures on consumer spending, will likely pose a “significant drag” on growth this year, Biswas added.
Beijing has been on high alert as it prepares to host the Winter Olympics next month, with its zero- COVID policy powering lockdowns, border restrictions and lengthy quarantines.
“The current coronavirus resurgence presents large downside risks to China’s economic recovery… amid the government’s zero-tolerance approach,” said ANZ Research’s chief economist for Greater China Raymond Yeung.
Yeung noted that Ningbo port, the world’s third-busiest, faced disruptions as cases led to truck entry restrictions, suspended container freight operations and roadblocks.
“These delays and backlogs could exacerbate the inflation in shipping costs as well as exert pressure on export volumes,” he told AFP.
Another major port city—Tianjin–was hit by an Omicron cluster in January, the first time the virus strain was found in the community in China.
Analysts expect that China will not ease up on its policy until after the Games conclude.