In the fourth quarter of 2022, China experienced a significant economic downturn due to strict Covid-19 restrictions and a decline in the property market. These measures were part of the Zero-Covid Policy. In 2021, China’s annual GDP growth was 8.1%, but in 2022, it dropped to 3.0%, falling below the official target of approximately 5.5% for the year. This was the second slowest economic growth rate since 1976, surpassing the 2.2% growth in 2020 after the initial impact of Covid-19.
In 1976, China faced negative economic growth of 1.6%, marking the end of the Cultural Revolution (1966-1976). The year was marked by a leadership crisis following the deaths of Chinese Premier Zhou Enlai and Chairman Mao Tse-Tung in January and September, respectively. This event led to a power struggle between radicals and moderates in the country. Additionally, an earthquake in Tangshan, Hebei on July 28, 1976, further intensified the situation by causing damage to factories, fuel resources, and rail services. It was one of the worst economic years since the establishment of the People’s Republic of China in 1949.
Similarly, the economic slowdown in 2022 coincided with a decline in China’s population for the first time since 1961. In that year, China experienced the end of the Great Famine, a period from 1959 to 1961 characterized by severe food shortages. The Great Leap Forward campaign, initiated by Chairman Mao during the second five-year plan (1958-1963), aimed to transform China from an agrarian economy to an industrial one but resulted in the famine.
China’s National Bureau of Statistics has reported a decrease of 850,000 individuals in China’s population in 2022. Official sources indicate that 10.41 million people passed away, while 9.56 million were born during that year. Despite this decline, the People’s Republic of China remains the world’s most populous country, with a population of 1.41175 billion, slightly surpassing that of India.
The decrease in China’s population can be attributed to the increasing number of deaths among the elderly population and a decline in the birthrate. Efforts by officials to address this issue, such as incentivizing families to have more children or relaxing the one-child policy, have not yielded significant results. This population decline is expected to continue over the long term, which could have significant implications for both the People’s Republic’s economy and the global economy as a whole. According to UN experts, the population is projected to decline by 109 million by the year 2050, three times more than the previous forecast in 2019.
China’s challenges in population decline are not limited to the country itself but also have consequences for other nations. A slowdown in China’s economy will adversely affect other countries, while a shrinking population implies reduced demand for consumer goods and smaller consumer markets. China’s economy cannot be detached from the global economy due to its size and importance as a consumer market. If China relies on trade with the world, the world also depends on China. A stable and prosperous Chinese economy would benefit other nations in a positive-sum game.
The impact of China’s economic slowdown is being experienced worldwide. This slowdown, resulting from a decline in the manufacturing sector and a shrinking labor force, is likely to contribute to inflation and high prices globally, especially in Europe and the US.
The slowdown has negatively affected trade figures in the US and has also had repercussions on Europe through changes in commodity prices and demand for exports. Additionally, this slowdown will have detrimental consequences for export-dependent countries in Asia, particularly in Southeast and South Asia, Africa, and Latin America. Brazil, Chile, and Peru are among the most vulnerable countries. The nations heavily reliant on commodity trade with China, including the US, will be significantly impacted.
Moreover, countries involved in China’s Belt and Road Initiative will also be affected. Notable examples include Sri Lanka, which defaulted in 2022, and Pakistan, which is seeking a 23rd fund facility extension from the International Monetary Fund until June 2023 to avoid default.
Furthermore, the immediate repercussions of China’s economic slowdown are being felt in stock markets, particularly in the Asia Pacific region.
It is estimated that China’s economy will recover in 2023 following the sudden removal of the Zero-Covid Policy in December 2022. The extent and speed of this economic rebound are uncertain. However, the volatile and unpredictable nature of China’s economy presents uncertain risks for other countries, reinforcing the notion that when China experiences difficulties, it has ripple effects globally. This imminent risk adds to the challenges of an already precarious decade.
*The writer is a Political Science Research student from Germany.
**The views expressed in this article are those of the author and do not necessarily reflect the views of The Diplomatic Insight. The organization neither endorses nor assumes any responsibility for the claims made in this article.
