Aurelia Butler

China’s economy grew by just 3 per cent in 2022, underscoring the heavy costs of the government’s longstanding zero-Covid strategy before it was abruptly abandoned last month.The country’s gross domestic product figures missed Beijing’s official growth target, which at 5.5 per cent was already the lowest in decades. Other than in 2020 at the beginning of the pandemic, when full-year GDP expanded 2.2 per cent, growth was the weakest since 1976.Although China’s economy is expected to recover in 2023 as the country reopens to the world, Tuesday’s data highlighted the scale of the challenge President Xi Jinping faces after three years in which far-reaching Covid controls took precedence over growth.In the fourth quarter, GDP was flat compared with the third quarter and rose 2.9 per cent year on year, higher than analyst expectations of a 1.6 per cent increase. Late last year, the government tightened Covid-19 restrictions in response to multiple urban outbreaks before suddenly easing them, allowing the virus to sweep across the population uninhibited for the first time.Economists expect growth to rebound this year compared with 2022, but policymakers face a host of challenges including Covid, a property crisis that has dragged home prices lower, a slump in exports as the global economy slows and China’s first population decline in 60 years.

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“The Chinese economy is at a pivotal point, with disruptions from the protracted zero-Covid policy and its abrupt reversal likely to give way to a resurgence of at least moderate growth by Chinese standards,” said Eswar Prasad, a China finance expert at Cornell University. “Growth momentum coming out of this difficult period will depend on how much and what kind of stimulus the government employs to put the economy back on track.”Asia-Pacific equities slipped on Tuesday following the data release, with Hong Kong’s Hang Seng index falling 1 per cent and China’s CSI 300 shedding 0.1 per cent. South Korea’s Kospi lost 0.6 per cent, and Japan’s Topix gained 0.8 per cent.Various metrics surpassed expectations in December but reflected underlying weaknesses as estimated Covid infections soared into the hundreds of millions, straining hospitals and weighing heavily on economic activity. Retail sales dropped 1.8 per cent year on year, compared with a 5.9 per cent fall in November, while industrial output added 1.3 per cent.Unemployment improved to 5.5 per cent from 5.7 per cent in November. Over the full year, industrial output rose 3.6 per cent, fixed asset investment rose 5.5 per cent and retail sales edged 0.2 per cent lower.

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“Generally speaking, positive results have been achieved in effectively coordinating the Covid-19 prevention and control and the economic and social development in 2022,” said Kang Yi, head of China’s National Bureau of Statistics. But he added that the “foundation of the economic recovery is not solid”, citing a “complicated” international backdrop and domestic pressures.“Data so far supports our long-held view that China’s reopening boost will be somewhat anaemic at the beginning, with consumer spending being a key laggard in the initial stages,” said Louise Loo, senior economist at Oxford Economics.In addition to abandoning the zero-Covid constraints, policymakers have recently unveiled potential stimulus for property developers to support a sector that has been hit by a wave of defaults over the past 18 months.

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Real estate investment fell by 10 per cent in 2022 as part of a property crisis that drove home sales 24 per cent lower by floor space and 27 per cent lower by dollar value.Additional reporting by Tom Mitchell in Singapore, Andy Lin in Taipei and William Langley in Hong Kong More

BENGALURU (Reuters) – Malaysia’s central bank will deliver its fifth consecutive quarter percentage point hike on Thursday in its effort to keep high inflation under check and provide support to a struggling currency, a Reuters poll found.Bank Negara Malaysia (BNM) became in May last year one of the first Asian central banks to hike rates in the current cycle and has added a cumulative 100 basis points. But it has largely failed to tame rising inflation, which was at 4.0% in November.Median forecasts in the poll showed inflation to average 3.0% this year, an upgrade from the 2.8% predicted in October.Despite the slower pace of tightening compared to its peers, the BNM’s governor, Tan Sri Nor Shamsiah binti Mohd Yunus, recently said its decisions would depend on evolving conditions and their implication on the outlook for growth and inflation.All but one of 27 economists in the Jan. 10-16 Reuters poll forecast the central bank to hike its overnight policy rate to 3.00%, where it was before the pandemic, at its meeting on Jan. 19. Only one expected no change.”Even though headline inflation has come off its peak, Bank Negara Malaysia is unlikely to lower its guard any time soon. Inflation still remains elevated by historical standards and core inflation has not shown any signs of moderation,” noted Khoon Goh, head of Asia research at ANZ.”The slower pace of rate hikes by the U.S. Fed has supported the ringgit, but there may be downward pressure via the trade channel due to expected weakness in global demand.”Malaysia’s ringgit, down over 5% last year and expected by a recent Reuters poll to fall another 4.0% against the dollar over the next three months, was also likely to keep the BNM on its toes as a weaker currency imports higher inflation.While a slim majority of respondents, 13 of 24, expected rates to still be 3.00% at end-March, 10 of them had a 3.25% forecast.Nearly 60% of economists, 14 of 24, expected rates to reach 3.25% or above by end-June, a quarter point higher from a November poll. They were then forecast to stay there for the remainder of the year.But economists were split on where rates would be this year, in a 2.75%-3.50% range.A net exporter of oil, Malaysia’s growth outlook is clouded by a slowdown in China – the country’s largest trading partner – and the rest of the world.The economy was expected to grow 4.0% this year and 4.5% in 2024, in line with the government’s projection of 4.0%-5.0%. (For other stories from the Reuters global long-term economic outlook polls package:) More

The Westpac-Melbourne Institute index of consumer sentiment released on Tuesday rose 5.0% in January, the largest monthly gain since April 2021 and building on a gain of 3.0% in December. However, the index reading of 84.3 still means pessimists greatly outnumber optimists.Westpac chief economist Bill Evans said one likely explanation for the lift in confidence is that January is the first month that did not see an interest rate hike by the Reserve Bank of Australia since April. “While that was because there was no RBA Board meeting in the month rather than an explicit decision by the Bank to leave rates unchanged, the break in the tightening cycle looks to have provided some relief,” said Evans.”If so, we should be cautious about reading the January sentiment rise as part of a continuing trend.”The RBA has raised rates by a whopping 300 basis points to a decade-high of 3.10% since May when they were at a record low of 0.1%.Futures have priced in a two-third probability of an additional 25-basis-point hike in the February policy meeting, and imply a peak rate of around 3.76%.For respondents with a mortgage, confidence jumped 10.7% compared to a 6.6% rise for renters and a 8.5% gain for those who own their homes outright.Westpac’s index on the outlook for house prices also showed a gain of 4.4% in January from December, though a majority still thought it was a bad time to buy.Measures of family finances compared with a year ago edged up 1.7%, while the outlook for finances over the next 12 months bounced 6.6%. The index of the economic outlook for the next 12 months jumped 10.2%, and the outlook for the next five years climbed 2.9%.Westpac’s measure of whether it was a good time to buy a major household item rose 3.6%, but was still down almost 21% on a year ago.A separate survey from ANZ also showed a small rise just last week, although the bank cautioned that spending data has turned weak in the first week of 2023. More

The Anglo-Australian miner said consumers remain cautious of China’s property market, which has been supportive to the economy, and that slowing global demand poses some risk to its exports. Shares fell 1% in line with a lower materials indexChina’s property sector was severely mired last year as debt-ridden developers failed to finish projects, but a flurry of property support measures coupled with Beijing’s abrupt removal of its zero-COVID policy last month cheered the market.Rio looks set to retain its crown as the world’s biggest iron ore producer as quarterly iron ore shipments came in slightly ahead of expectations, near the bottom of the year’s guidance. “Results are broadly in line,” said Glyn Lawcock of Barrenjoey in Sydney. “It’s good to see they made their iron ore guidance. Rio has also noted that system inventories are healthy. … That puts them on track for a good start to 2023.” Shipments of iron ore rose slightly in the final quarter of 2022, benefiting from a continued ramp-up at Rio’s Gudai-Darri mine in Western Australia, which is expected to reach its nameplate capacity, or the capacity the mine is designed to produce, during 2023.Iron ore shipments for the final quarter of 2022 rose 3.8% to 87.3 million tonnes (Mt), bringing full-year shipments to 321.6 Mt, which beat a Visible Alpha consensus estimate of 320.2 Mt.Rio Tinto (NYSE:RIO) maintained its full-year iron ore shipments forecast of 320 Mt to 335 Mt.Inflation, led by diesel and labour costs, is likely to have pushed the company’s Pilbara iron ore unit cash slightly above the top end of its $19.5-$21.0 per tonne guidance range, it said. Rio expects refined copper production at its Kennecott operations in Utah in the United States to be challenged until it rebuilds its smelter operations, which is planned for the second quarter of 2023 and is expected to take approximately three months.”The market was probably disappointed by mined copper and obviously they are flagging a tough first half with a major smelter rebuild in Kennecott,” Lawcock added.Unplanned maintenance was required at Rio’s anode furnaces leading to extended downtime and continued poor anode production, which is likely to result in weak cathode production in the first quarter of 2023. More

BEIJING (Reuters) – China’s economy is expected to have slowed sharply in the fourth quarter due to stringent COVID curbs, dragging down 2022 growth to one of its worst in nearly half a century and raising pressure on policymakers to unveil more stimulus this year.Data on Tuesday is forecast to show gross domestic product (GDP) grew 1.8% in October-December from a year earlier, halving from the third-quarter’s 3.9% pace, according to a Reuters poll. Such an outcome would still exceed the second quarter’s 0.4% rate of expansion.On a quarterly basis, GDP is projected to contract 0.8% in the fourth quarter, compared with growth of 3.9% in July-September.”The Chinese economy appears to have ended the year on a weak tone,” economists at JPMorgan (NYSE:JPM) said in a research note. “As suggested by the weak December NBS PMI report, domestic activity likely slowed further by year-end as rapid relaxation of control measures led to a sharp spike in COVID-19 cases.”Beijing last month abruptly lifted its strict anti-virus measures that had severely restrained economic activity in 2022, but the relaxation has also led to a sharp rise in COVID cases that economists say might hamper near term growth. Factory output is forecast to inch up 0.2% in December from a year earlier, slowing from a 2.2% rise in November, while retail sales, a key gauge of consumption, is seen shrinking 8.6% last month, extending November’s 5.9% drop.For 2022, GDP likely expanded 2.8%, badly missing the official target of “around” 5.5% and braking sharply from 8.4% growth in 2021. Excluding the 2.2% expansion after the initial COVID hit in 2020, it would be the worst showing since 1976 – the final year of the decade-long Cultural Revolution that wrecked the economy.Growth is likely to rebound to 4.9% in 2023, as Chinese leaders move to tackle some key drags on growth – the “zero-COVID” policy and a severe property sector downturn, according to the poll. Most economists expect growth to pick up from the second quarter. The government is due to release the GDP data, along with December activity indicators, on Tuesday at 0200 GMT.Beijing’s abrupt lifting of COVID curbs last month has prompted analysts’ upgrades of its economic outlook and a jump in Chinese financial markets, but businesses have struggled with surging infections, suggesting a bumpy recovery in the near term.Economists at Morgan Stanley (NYSE:MS) expect an earlier and stronger growth recovery from the first quarter, lifting 2023 GDP growth to 5.7%.”We believe the market is still under-appreciating the far-reaching ramifications of reopening and the possibility that a decent cyclical recovery can occur despite lingering structural headwinds,” they said in a note. Chinese leaders have pledged to prioritise consumption expansion to support domestic demand this year, at a time when local exporters struggle in the wake of global recession risks. At an agenda-setting meeting in December, top leaders pledged to focus on stabilising the economy in 2023 and step up policy support to ensure key targets are hit.China is likely to aim for economic growth of at least 5% in 2023 to keep a lid on unemployment, policy sources said.The central bank is expected to steadily ease policy this year, pumping out more liquidity and lowering funding costs for businesses, while local governments are likely to issue more debt to fund infrastructure projects. More