Fitch boosts growth forecast for China

Citing signs that China’s economy is rebounding more quickly than expected from its strict anti-Covid policies, Fitch Ratings is raising its GDP forecast for China in 2023.

The rating agency bumped up its forecast for China’s economic growth this year from 4.1% to 5.0%.

In a report detailing the shift, Fitch pointed to “evidence that consumption and activity are recovering faster than initially anticipated” after the government authorities shifted their approach to pandemic control in late 2022.

“The large wave of Covid-19 infections that followed the authorities’ change of approach appears to be subsiding, based on public communications from health officials and improving mobility trends,” it said.

Additionally, while certain economic indicators remain below their pre-pandemic levels, they have bounced back in recent months.

“The swift rebound from the Covid shock wave means that activity in [the first half of 2023] will be stronger than we had forecast,” it said. “Real GDP growth was also higher in [the fourth quarter of 2022] than we had expected when our last forecast was published … so the recovery will come off a firmer base.”

Fitch said it expects the economic recovery to be driven by increased consumption “as households re-engage in activities previously hampered by health controls.”

In 2022 consumption supplied only one percentage point of GDP growth, compared with its pre-pandemic average of four points, Fitch said.

“The sharp acceleration in household deposit growth recorded over 2022 could support even faster ‘catch-up’ consumption than we now anticipate,” it said.

However, the recovery isn’t expected to be as strong as the one China recorded in 2021, in part due to “ongoing weakness in the property market, which showed little evidence of an improvement in sales or housing starts in late 2022, despite a build-up of incremental policy support.”

Additionally, trade is expected to act as a drag on GDP growth in 2023, it said, “as a rebound in overseas travel by Chinese consumers will lift services imports, while export demand will be depressed by economic slowdowns in the U.S. and Europe.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.