China’s economy ends 2022 in slump as Covid infections surge

Bloomberg

China’s economy ended the year in a major slump as business and consumer spending plunged in December, with more disruption likely in the first few months of the year as Covid infections surge across the country.
Official data showed the decline in manufacturing worsened last month, while activity in the services sector plunged the most since February 2020.
Separately, a private survey of businesses by China Beige Book International suggests the economy contracted in the fourth quarter from a year earlier.
China’s abrupt ditching of strict Covid controls in December fuelled a surge in infections in major cities, prompting people to stay home as they fell ill or feared becoming infected.
While the outbreak has likely peaked in places like Beijing, and economic activity is starting to rebound there, the virus is spreading fast across the country. A likely travel rush during the Lunar New Year holiday in late January could see cases spread to rural areas, disrupting activity in the first quarter.
Citigroup Inc economists said December could be the low point for PMI and a recovery could be on the cards in coming months.
“A more broad-based recovery could start with peak infection,” Citigroup’s chief China economist Yu Xiangrong and his colleagues wrote in a note.
Economists expect a faster rebound once the infection
wave peaks, with growth
forecast to accelerate to 4.8% this year from an estimated 3% in 2022.
Stock investors have turned more bullish for the new year amid bets that China’s reopening from Covid curbs, while chaotic to begin with, will eventually boost the economy and corporate profits.
The Hang Seng China Enterprises Index, which tracks Chinese firms listed in Hong Kong, has surged 36% in the last two months, beating a broader index of Asian equities by more than 20 percentage points.
The index is expected to rebound in 2023 after capping a third straight year of declines — a record losing streak since its inception in 1994.
The lifting of the Covid curbs in December came at a time when the economy was already quite weak. Covid restrictions had pushed consumer and business sentiment close to record lows, the property market is in a record slump and overseas appetite for Chinese goods has plummeted.