China’s economy poised to grow around 5.5%, cabinet adviser says
China will be able to achieve economic growth of around 5.5% in 2022, an adviser to the government’s cabinet said on Friday, making a rosier prediction than markets expect as recent data have pointed to slowing momentum.
The world’s second-largest economy cooled over the course of last year and faces multiple headwinds as a property downturn hurts investment and China’s efforts to contain local cases of the highly contagious Omicron variant of COVID-19 weigh on consumption.
That has prompted policymakers to roll out an array of support measures, including Friday’s cut by the central bank in the rate on standing lending facility (SLF) loans by 10 basis points, a day after it cut benchmark lending rates.
Friday’s comments by Zhu Guangyao, a former vice finance minister, are more optimistic than those from private economists.
A Reuters poll of analysts published on Jan. 13 forecast China’s economy would grow 5.2% in 2022.
The government will unveil a growth target for 2022 at the opening of the annual parliament meeting in early March.
“I’m confident that China’s economic growth will be around 5.5% in 2022,” Zhu told a media briefing, adding that the potential economic growth rate was estimated at 5-6%.
Li Yang, former vice president of the Chinese Academy of Social Sciences, a top government think tank, said China has policy space to support the economy.
China was restrained on monetary policy and fiscal policy in 2021, leaving some space for this year, Li said during the same event on Friday hosted by China’s State Council Information Office.
On Thursday, Premier Li Keqiang said China will take more “practical and concrete measures” to boost effective demand and stabilise market expectations, state media reported.
China’s cabinet has pledged to speed the issuance of local government special bonds to boost investment, while the finance ministry has issued 1.46 trillion yuan ($230.26 billion)in the 2022 advance quota for local special bonds.
Chinese policymakers, however, have ruled out “flood-like” stimulus for fear of reigniting debt and property risks.
China’s economy expanded 8.1% in 2021, the fastest in a decade due partly to the low base from 2020 when COVID-19 jolted the economy, comfortably beating an official target of “above 6%”.
Last year, Chinese policymakers focused on curbing property and debt risks, exacerbating the slowdown, but have eased back somewhat so as not to fuel job losses ahead of a key Communist Party Congress late this year.
Zhu also said that expected interest rate hikes by the U.S. Federal Reserve could have a big market impact, Zhu said, and said that the United States should strengthen its policy coordination with emerging economies, including China.
“We hope the United States could change the idea that ‘the dollar is our currency, but your problem’, and truly strengthen its policy coordination with other countries, especially developing countries and emerging market countries,” Zhu said.
Li said the expected Fed tightening could trigger capital outflows from developing countries, with some already feeling the pressure.
The impact on China’s economy will be contained by its controls on capital flows and a managed-float yuan exchange rate, Li added.
Economists polled by Reuters expect the Fed to raise its key interest rate three times this year, tightening policy at a much faster pace than thought a month ago to tame persistently high inflation.