China Enters 2023 with Economic Uncertainty Despite Relaxation of Covid Restrictions

The coming year will no doubt be tumultuous for employers and employees in China, as the country navigates the uncertainties of the Covid reopening, a weaker industrial segment, and an imbalance in talent versus vacancies. Please join us at our AP/India Summit to discuss current and future challenges and how global companies are dealing with them. 

Figures recently released by the Chinese government show a year on year decline of 3.6% in Industrials profits, alongside the lowest consumer confidence index since 2013.  On December 20^th, the World Bank announced a 2022 GDP outlook for China of 2.7%, down from its June 2022 forecast of 4.3%.  The Bank is outlooking a GDP of 4.3% in 2023, a significant reduction from the previous forecast of 8.1%.    

While Covid restrictions are being relaxed, case increases have had a significant impact on business continuity and production.  The Japanese Embassy in Beijing has stated that some Japanese manufacturing facilities in China have 30-40% of staff with Covid, reducing production capacity by half.   Youth unemployment remains obstinately high, with ongoing visible protests at Universities focused on Covid restrictions and unemployment.  The global significance of a strong Chinese economy is not to be underestimated, with gold prices reaching a 6 month high upon the December 27^th announcement of Chinese border relaxation and removal of quarantine for inbound travelers. 

Outlook for Employers:  The coming year will no doubt be tumultuous for employers and employees alike, as China navigates the uncertainties of the Covid reopening, a weaker industrial segment, and an imbalance in talent versus vacancies.  A shortage of workers in the behemoth manufacturing sector is juxtaposed against the volume of highly educated unemployed youth, who have career and wage expectations beyond those currently offered in the industrial sector.  Underpinned by economic growth directives from the government, employers are likely to see a range of competing pressures at play as the new year unfolds.