The strength of China‘s international trade has partly offset the weakness of domestic demand, according to the Asian Development Bank (ADB).
Chinese merchandise exports in the first five months of this year increased by 13.3 percent and imports by 7.5 percent.
In particular, exports to the United States, the European Union (EU) and Association of Southeast Asian Nations countries grew at double-digit rates.
For now, the ADB revised down its growth forecast for East Asia from 4.7 percent to 3.8 percent by 2022, as growth in the People’s Republic of China will be weaker than expected.
China’s economy was hit by new Covid-19 cases in Shanghai and other cities, followed by shutdowns that lasted several weeks and weighed on consumption and investment early in the second quarter.
While in the first five months of 2022, retail sales growth is estimated to have contracted 4% in real terms, nominal fixed asset investment rose 6.2%, but manufacturing and infrastructure investment growth has slowed and real estate investment has declined.
In addition to the weakness induced by the shutdown in household consumption, another drag on the Chinese economy is that the housing market has not stabilized.
International trade and construction
According to the ADB, average new home prices in 70 major cities fell 0.8% y-o-y in May 2022, despite a reduction in the minimum mortgage rate for first-time homebuyers and a 15 basis point cut in the five-year lending rate in May.
As household demand has been affected by the recent Covid-19 outbreaks, adding to existing tensions in the housing market, the growth forecast for China has been revised down by one percentage point to 4% in 2022.
This forecast assumes a gradual recovery in household consumption, stabilization of the real estate sector, a pickup in infrastructure investment in the second half of the year and government measures to boost credit supply.
The forecast for 2023 remains unchanged, as the carryover effects of accelerating growth in the second half of 2022 are likely to be dampened by fiscal consolidation efforts next year.