The Economist - USA (2022-01-22)

TheEconomistJanuary22nd 2022 63

Finance & economics

China’seconomy

Omicronic pains

C

hina hasnot enjoyed much success at

the sport of curling, which will feature

in  the  Beijing  winter  Olympics  beginning

on  February  4th.  But  the  country’s  eco­

nomic  policymakers  could  draw  inspira­

tion  from  the  obscure  event.  Like  curlers,

they have a difficult target to hit. They are

thought  to  be  aiming  for  growth  of  5%  or

more  in  2022,  despite  the  threat  posed  by

the  arrival  of  the  Omicron  variant  of  co­

vid­19, which has appeared in seven prov­

inces, big cities like Shanghai and Tianjin,

and  was  reported  in  Beijing  for  the  first

time on January 15th.

The  parallels  do  not  stop  there.  Just  as

the  curlers  must  slide  a  “stone”  (a  kind  of

oversized puck) with enough force to reach

the target, but not so much that it crashes

off  the  ice,  so  must  China’s  policymakers

strike a balance. They must give a slowing

economy  enough  oomph  to  grow  by  5%,

but not so much that it exceeds its limits,

contributing to inflation and speculation.

According  to  figures  released  on  Janu­

ary 17th, China’s gdpgrew by 8.1% in 2021,

its fastest pace since 2011. “Nominal” gdp,

which  does  not  adjust  for  inflation,  grew

evenmorequickly:byabout12.6%.Andbe­

causeChina’scurrencyalsostrengthened,

itsgdpsurpassed$17.7trn(atmarketex­

changerates),anincreaseof20%overthe

yearbefore.Judgingbythesenumbers,the

economywouldseemtohaveallthemo­

mentumit needs.

ButthepandemicsoweakenedChina’s

economyinearly 2020 thatthefollowing

yearwasalwaysgoingtolookunusually

strongbycomparison.As 2021 progressed,

growthebbed(seechart1).Nowtheecon­

omymustalsocontendwiththeOmicron

variant. Unlikeothercountries,Chinahas

nointentionto“livewith”thevirus,evenif

itslatestiterationislessseverethanearlier

ones.It willinsteadtrytokeepcovid’sleast

repressiblevariantatbay.Mandatorytest­

ingin Tianjin,for example,hasalready

forcedToyotatosuspendcarmakingatits

jointventureinthecity.Volkswagenhas

experiencedsimilarproblems.

Meanwhile,Deltahasnotdisappeared.

A wide­ranginglockdownwasimposedon

thecityofXi’anincentralChinaafteritsof­

ficialsfailedtocontainanoutbreakofthe

Delta variant quickly enough. Micron,

whichassemblesandtestsdrammicro­

chips(usedfortemporarystorage)inthe

city,saidthemeasureswouldhave“some

impact”onitsplant’soutput.Samsungal­

sosaidit willhaveto“adjust”productionat

itsflash­memoryfactory,whichaccounts

forabout15%oftheworld’scapacityfor

nand chips, accordingto TrendForce,a

market­intelligencefirm.(nandchipsare

usedforpermanentstorage.)

China’s overseas customers worry

aboutwhatwouldhappenifa Xi’an­style

lockdownwereimposedona citycloserto

theheartofthecountry’sexportmachine.

ButoptimistspointoutthatChina’sexport

hubsliemostly inmore prosperous re­

gions with more capable governments.

Theyhavemoreeffectivecontacttracing,

whichcouldallowtheirlockdownstobe

H ONG KONG

As lockdowns and crackdowns take theirtoll,policymakersseektorevivegrowth

→Alsointhissection

64 Howgummeduparesupplychains?

65 MixedmessagesonWallStreet

66 TheracetodominateDeFi

67 Perksandthepandemic

68 Buttonwood:Thedebtbias

69 Freeexchange:Robotsandjobs

Sliding

China, GDP, % change on a year earlier

Source: Haver Analytics

1

18

15

12

9

6

3

0

-3

-6

-9

2017 21201918