HONG KONG—China’s growth rate slipped to one of the lowest levels in decades last year, underscoring the heavy toll that a property-sector collapse and weak consumer confidence have taken on the world’s second-largest economy despite the lifting of all Covid-19 restrictions.
Gross domestic product in China expanded 5.2% in the fourth quarter and for the full year in 2023, according to data released by the National Bureau of Statistics on Wednesday. The reading confirmed a number uttered by Premier Li Qiang a day earlier at the World Economic Forum in Davos, Switzerland—an unusual disclosure of a high-profile data point by a senior leader before its formal release.
Apart from the three years that China was closed to the outside world during the pandemic, the country’s economy expanded in 2023 at the slowest annual rate since 1990, the year after the political turmoil of the student movement that was crushed around Beijing’s Tiananmen Square in June 1989.
In 2022, China’s economy grew 3%, while 2020—the initial year of Covid-19—saw growth of just 2.2%. This year’s outcome was flattered in part by comparison with the relatively low base of 2022, when harsh pandemic lockdowns swept the nation, crimping growth.
Last year’s 5.2% growth rate managed to top the government’s official target of around 5% growth, following a year of volatility and shifting expectations.
Maintaining growth at a similar pace this year may prove harder, given policymakers’ hesitance so far to launch any big-ticket stimulus packages. Forecasts for China’s growth rate this year among several global investment banks range from 4% to 4.9%. China is expected to announce a formal growth target at an annual political gathering set to take place in March.
In the near term, China has few obvious growth drivers. Export demand is softening as the global economy is projected to slow this year. Chinese families, hit by years of pandemic restrictions and receiving no direct financial support from the government, have turned cautious on spending amid a weak job market. Private businesses have been holding off on new investments while foreign investors are pulling funds out of the country.
The Chinese leadership’s determination to cultivate new engines of growth, in fields such as electric vehicles and renewable energy, is bearing fruit. Still, in the near term, it won’t likely be enough to make up for the shortfalls in job creation and overall growth rate from the rapid decline in its once-mighty real-estate sector.
In the longer run, China faces a daunting list of headwinds, from a shrinking population to a quickly worsening external political environment that has seen relations with the U.S.-led West plummet.
Wednesday’s data release offered fresh signs of the dire state of the country’s demographics. Official statisticians said China’s population shrank by 2.08 million people last year, to 1.410 billion, after declining in 2022 for the first time in decades.
Economists are concerned that China may be falling into a vicious cycle in which falling prices and weak demand reinforce one another, as they did in Japan in the 1990s. Chinese policymakers’ reluctance to stimulate more forcefully has confounded many economists, though others have pointed to leader Xi Jinping’s ideologically-rooted reluctance to shower the economy with government money.
Instead, Chinese authorities have unleashed a barrage of smaller-bore measures, such as trimming key interest rates, cutting mortgage costs for home buyers and prodding banks to lend more to distressed property developers. Collectively, though, those measures have done little to reverse downward pressure on the economy. The government said in the fall that it would issue $137 billion in government debt, the biggest stimulus measure it has undertaken so far—though still not enough to reverse the downward momentum, economists say.
“I wonder if they are not realizing how big the risk is if deflation pressure becomes entrenched,” says Alicia García-Herrero, chief Asia economist at investment bank Natixis.
Grace Zhu and Xiao Xiao in Beijing contributed to this article.
Write to Stella Yifan Xie at stella.xie@wsj.com