Experts: Lantern Festival is the key to China’s economic recovery

The pandemic hit China’s economy hard in 2022, and recovery from the pandemic has become the main theme this year. Experts believe the outbreak at the end of last year will drag down the economy in the first quarter of this year, and the Lantern Festival on February 5 will be key to determining whether China’s economy can recover in time.

China’s strict zeroing policy over the past three years has led to a worsening economy, with spending on large-scale nucleic acid testing and shelter construction straining local governments’ finances and flattening social and economic activity. China’s National Bureau of Statistics (NBS) said on Thursday that its economy will grow by 3% in 2022, nearly half Beijing’s target of 5.5%.

At the Central Economic Work Conference held last month, the Communist Party of China set the economic priority for 2023 as “ensuring stability and seeking progress while maintaining stability”. We will work hard to expand domestic demand, give priority to “restoring and expanding consumption”, and increase personal income through multiple channels.

In this regard, several economic experts analyzed that on January 8, China classified COVID-19 as “Class B and Class B”, ending three years of strict quarantine and re-opening to the world. The economy will recover in 2023, but “the initial recovery of a serious disease needs time to recover”, and the road to recovery will be “squat first and then jump”.

Lu Ting, chief China economist at Nomura, said China’s economic recovery is expected in 2023 as the country optimises its epidemic prevention policies and shifts its property policy. But taking various factors into account, expectations for the strength of the recovery need to be moderately lowered.

In particular, the first wave of COVID-19 outbreak at the end of last year may cause China’s gross domestic product (GDP) growth to turn negative in the first quarter of this year, Lu said. The observation point will be after the Lantern Festival (February 5), which will be the key to judge whether China’s economy can recover in time. If a large number of returning migrant workers are unable or unwilling to return in time, the impact on the economy in the spring will increase significantly.

The aftermath of the pandemic will also dampen the economic rebound, he said, with Chinese exports slowing and retaliatory consumption and property investment likely to pick up less than expected. Combined, it is estimated that the economy will grow by about 5% in 2023 due to COVID-19 and other factors.

According to the 2023 “Economic Blue Book” released by the Chinese Academy of Social Sciences at the end of last year, China’s economy is expected to grow by 5.1% in 2023. China Securities Times earlier this year quoted several economists as predicting that China’s 2023 growth rate would fall between 5 percent and 6 percent, with the economy starting to recover significantly in the second quarter.

Shen Jianguang, chief economist of Jingdong Group, believes that China’s economy is indeed expected to rebound in the second quarter of 2023 with the implementation of epidemic prevention policies and stabilizing growth policies. However, whether consumption can continue to recover depends on the strength and implementation effect of consumption stimulus policies, as well as the recovery of consumer confidence.