China’s economy is expected to grow around 5.3% in 2022 following an expected 8% growth this year, according to the Blue Book on the Chinese Economy by the Chinese Academy of Social Sciences (CASS). “China’s fiscal policy needs to remain proactive in 2022, with a focus on promoting its efficiency and quality, especially in fields like industrial upgrading and urbanization,” Li Xuesong, Director of the Institute of Quantitative and Technological Economics, said. “A prudent monetary policy should focus on stabilizing credit growth and dealing with inflation.”
Given the grim and complicated economic situation at home and abroad, the government should make a big push to ensure stable prices and supplies, strengthen the industrial and supply chains, effectively prevent and control the Covid-19 pandemic, continuously boost technological innovation, effectively expand domestic demand, prepare to fend off risks and expand reforms and opening-up in key fields, Li said. The Blue Book said the expected 5.3% growth in 2022 will bring the average annual growth rate forecast for the 2020-22 period to 5.2%, higher than the 5.1% from 2020 to 2021. The blue book estimated China’s overall prices will rise moderately in 2022, with the producer price index and the consumer price index increasing 5% and 2.5%, respectively. Imports and exports in 2022 are expected to grow 10.4% and 6%, respectively, the China Daily reports.
China's factory activity beat market expectations and returned to expansion in November as power shortages in some provinces were mostly resolved and prices for major raw materials fell, official data showed. Experts said that the manufacturing Purchasing Managers' Index (PMI) will remain in expansion territory in December, but pressure from the external environment – including the emerging Omicron variant – has led to increased uncertainty. According to the National Bureau of Statistics (NBS) the official manufacturing PMI rose to 50.1 from 49.2 in October, beating broad expectations and rebounding after two months of contraction. The 50-point mark separates expansion from contraction. “The manufacturing PMI returned to expansion, indicating that the manufacturing industry's production and operating activities accelerated and improved,” said Zhao Qinghe, Senior NBS Statistician. Zhao attributed the improvement to a range of targeted measures to strengthen market supplies and stabilize prices, which eased power shortages and led to significant falls of some raw materials prices in November. Among the 21 industries surveyed, 12 were above the threshold, an increase of three from the previous month.
Activity at small and medium-sized firms picked up as well. The PMI for medium-sized enterprises was 51.2 in November, ending a two-month contraction, and the one for small businesses was 48.5, a point higher than the previous month. The sub-index for new export orders stood at 48.5 in November, up 1.9 points compared with October, while import orders hit 48.1, up 0.6 points. The ongoing global economic recovery, combined with the upcoming Christmas consumption season in overseas markets and a foreign trade boom, all contributed to the positive trend, said Zhao. Dong Dengxin, Director of the Finance and Securities Institute at the Wuhan University of Science and Technology, forecast the uptick in factory activity would continue in December, given positive domestic economic fundamentals backed by strong exports and rising investment by local governments, combined with a steady rebound in retail sales.
In contrast to the uptick in the manufacturing sector, growth in the services sector slowed slightly with the official non-manufacturing PMI in November down to 52.3 from 52.4 in October. Zhao said the slowdown was due to small-scale Covid-19 flare-ups, which affected some services industries, including accommodation, culture, sports and entertainment, the Global Times reports.
Despite the threats posed by Covid-19 variants and supply constraints, China is on track to achieve economic growth well above its target this year with a controllable inflation level, officials and experts said. Vice Premier Liu He said China’s economy has continuously recovered this year and its full-year GDP growth is projected to exceed the expected target. The Chinese economy is expected to achieve about 8% GDP growth for the whole year.
The People's Bank of China (PBOC) on November 6 announced a 50 basis-point universal cut in the reserve requirement ratio (RRR) for financial institutions, effective from December 15, which would inject CNY1.2 trillion in long-term liquidity into the economy, as the Political Bureau of the Communist Party of China (CPC) held a meeting on the country's economy and stressed the need for stability in economic development in 2022. It is the second RRR cut this year, following a similar cut in July. The reduction will bring the weighted average RRR for financial institutions to 8.4%.
