China's Q4 GDP shows patchy economic recovery, many challenges ahead

China's economy grew 5.2 per cent in the fourth quarter from a year earlier, official data showed on Wednesday, missing analysts' expectations slightly but still ensuring Beijing met its annual 2023 growth target despite a shaky start to the year. Confounding most analysts' expectations, the world's second-largest economy has struggled to mount a strong and sustainable post-COVID pandemic bounce, burdened by a protracted property crisis, weak consumer and business confidence, mounting local government debts, and slower global growth.

Analysts polled by Reuters had forecast fourth-quarter gross domestic product (GDP) would expand 5.3 per cent from a year earlier, quickening from the third quarter's 4.9 per cent pace. "The recovery from COVID -- disappointing as it was -- is over," according to China Beige Book International's latest survey released on Wednesday. "Any true acceleration (this year) will require either a major global upside surprise or more active government policy."

For the full-year 2023, the economy grew 5.2 per cent, data from the National Bureau of Statistics data showed, partly helped by the previous year's low-base effect which was marked by COVID-19 lockdowns. Analysts had forecast 5.2 per cent growth. On a quarter-by-quarter basis, GDP grew 1.0 per cent in October-December, in line with expectations for a 1.0 per cent increase and compared with a revised 1.5 per cent gain in the previous quarter. Beijing set a growth target of around 5 per cent for 2023 and policy insiders expect it to maintain a similar goal for this year.

December activity indicators released along with the GDP data on Wednesday showed factory output growth quickened at the fastest pace since Feb 2022, but retail sales grew at the slowest pace since September. Investment growth remained tepid. Sustained weakness in the property sector, once a key driver of the world's second-biggest economy, continued to drag on the broader economic recovery.

China's December new home prices fell at the fastest pace since February 2015, marking the sixth straight month of declines, NBS data showed on Wednesday. Property sales by floor area fell 8.5 per cent for the year while new construction starts plunged 20.4 per cent. "I think markets were disappointed they didn't cut interest rates on Monday, but it seems they are thinking about more targeted measures," said Woei Chen Ho, economist at UOB. "The property issues are not fixed by broad-based rate cuts."

On Monday, the central bank left the medium-term policy rate unchanged, defying market expectations for a cut as pressure on the yuan currency continued to limit the scope of monetary easing. Unemployment figures suggested the country's job market worsened slightly, as the nationwide survey-based jobless rate increased to 5.1 per cent in December from November's 5.0 per cent. Recent data suggested the economy was starting 2024 on shaky footing, with persistent deflationary pressures and a slight pick-up in exports unlikely to kindle a quick turnaround in lacklustre factory activity. December bank lending was also weak. Adding to concerns over China's longer-term growth prospects, the country's population fell for a second consecutive year in 2023. The total number of people in China dropped by 2.75 million to 1.409 billion in 2023, a faster decline than in 2022.