China economic bounce to fall short of IMF forecast - Oxford Economics

(Alliance News) - China's post-Covid-19 bounce will be smaller than forecast by the International Monetary Fund, analysts at Oxford Economics said on Tuesday.

They expect the Chinese economy to grow 4.5% in 2023, which would be below both consensus and an IMF prediction of 5.2%.

The research house expects the Chinese economy to follow a trend seen by Asian neighbours that called time on strict Covid curbs. Oxford Economics expects an "initial consumption rebound" that loses fizz within a few quarters after.

"Private consumption will continue to be weighed down by a combination of weak employment, slowing income growth, depressed consumer sentiment, and the housing downturn," Oxford Economics said.

After almost three years of stringent health restrictions, Beijing in December abruptly ended the zero-Covid policy that had battered the economy and provoked widespread protests.

China's economy is expected to contribute a quarter of global growth this year, the International Monetary Fund said Friday.

Authorities in China have said the soaring virus case numbers that accompanied the reopening have now passed their peak, with a travel surge prompted by the biggest Lunar New Year holiday in years offering a much-needed boost to business.

Oxford Economics analysts added: "While the consensus view is for a strong recovery in consumption, fuelled by excess household savings accumulated during the pandemic, we doubt it will play out like that."

The Chinese consumer is unlikely to have built up the same level of savings as the those in more advanced economies, Oxford Economics predicted. In addition, those that have seen their coffers swell are only likely to be in upper-middle to high-income urban households.

The Chinese property market is also under pressure, said Oxford Economics.

"While the reopening should help shore up consumer confidence and eventually labour market conditions, the property downturn and slowing global growth will exert a drag on the pace of consumer recovery," Oxford Economics predicted.

By Eric Cunha, Alliance News news editor

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