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Wednesday, December 29, 2021
China's Economic Growth in 2022 Calls for Attention
ANBOUND

As the year 2021 draws to a close, the prospect of China's economic growth in 2022 has become one of the main focuses of the market.

Not long ago, a survey on Chinese economists compiled by the Nikkei News Agency and Nikkei Quick News showed that the average growth rate of China's gross domestic product (GDP) in 2022 is 5.1%, with the COVID-19 pandemic and the cooling down of China's real estate market being the main negative factors in this figure. The Japanese media stated that there is a plan within China to set a growth rate target of 5.5% to 6% in 2022, and measures to boost the economy have become the focus of policy. The average growth rate predicted by the media survey shows that China's economic growth from October to December 2021 would be 3.3%, and the annual growth rate in 2021 would be 7.9%. This is can be largely attributed to the low base due to the pandemic in 2020. The survey also shows that the quarter-on-quarter growth rate of the Chinese economy from October to December this year is expected to be 1%, and the momentum of economic recovery continues to be weak. Of the 33 people surveyed, 11 predicted that it would be around 4%, which is lower than the potential growth rate of around 5.5%.

Credit insurance company Euler Hermes believes that worries about real estate investment and the "zero COVID" policy will reduce domestic demand in China. Before the effect of policy relaxation becomes apparent, the growth in the first half of 2022 will continue to decelerate. Barclays Bank predicts that China's economic growth rate will be 4.7% in 2022. Economists of the bank pointed out that real estate sales and investment are more severe than expected, and policies on the pandemic will continue until the party congress in the fall. Shen Jianguang, Vice President of Jingdong Group, believes that China's economy will face huge downward pressure in early 2022, and it will continue to improve afterwards, reaching 5% for the entire year of 2022. Regarding downside risks, most economists surveyed mentioned the "real estate market." Lin Yanhong of the Bank of East Asia believes that real estate sales and construction will be sluggish in 2022. In addition to local finances, it will also affect related industries such as steel and cement, as well as personal consumption.

It is worth noting that voices that believe that China's "zero COVID" policy has more disadvantages are increasing. Mihoko Hosokawa of Mizuho Bank believes that, "as long as the zero-COVID policy is in force, the impact of suspended economic activity, such as area lockdowns and production stoppages to cope with sporadic infection outbreaks, will continue. As a result of the continuation of national seclusion, the recovery of domestic demand will take time". For this reason, many believe that China will initiate economic stimulus measures. Fan Xiaochen, head of economic research in Hong Kong for Bank of Tokyo-Mitsubishi UFJ, believes that further economic stimulus measures will be introduced in the spring of 2022, and that housing prices will stabilize due to housing loan relaxation measures. Sano Tetsuji, chief Asia economist at the Asia Research Center of Sumitomo Mitsui DS Asset Management (Hong Kong) also pointed out that, "the government is propping up the property market" and the effect has begun to show.

According to researchers at ANBOUND, China's economic growth rate next year is something that calls for attention. Since the economic growth in 2021 is based on a very low base of 2020, theoretically in 2021 China would enjoy high economic growth. However, judging from the actual situation in the latter quarters of this year, the economic growth rate in 2021 is less than ideal. This shows that China's economy this year is actually in a difficult situation. Under such circumstances, China's economic growth in 2022 will face greater challenges.

At the ANBOUND Seminar: 2022 Economic Trend Prediction and Judgment held on December 17, ANBOUND's founder Chan Kung expressed his concerns about China's economic growth next year. Based on ANBOUND's analysis of the overall situation in the years before and after the pandemic in early 2020, China's economy should return to a growth rate of 6% to 7% in 2022 to achieve steady growth. If the economic growth rate drops to 5% or even lower in 2022, a number of issues will emerge, such as exhaustion of financial resources, debt problems, and decline in the vitality of various departments. These are the challenges that China will face in 2022. In particular, it is important to point out that with regard to China's economic growth next year, local governments have not much room to maneuver. Therefore, the National Development and Reform Commission, the Ministry of Commerce, the Ministry of Industry and Information Technology and other departments will need to make adjustments based on their grasp of the overall situation.

Final analysis conclusion:

China's economy has moved from high-speed growth to a medium-speed growth phase. What it needs now is steady and balanced development. In 2022, relevant parties in China need to be aware of the challenges facing the country's economic growth. It is worth noting that China's economy may very well maintain such a pattern in the next year, and even in many years to come.

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