HE XIAO

16 Dec 2021

(Yicai Global) Dec. 16 — China’s gross domestic product is expected to grow 5.13 percent next year, despite downward pressure on the economy, according to the average forecast of 18 chief economists from major financial institutions polled by Yicai Global.

Economic growth this year will likely come in at 8.06 percent due to last year’s low base caused by the Covid-19 pandemic, according to the economists.

China’s economy grew 9.8 percent in the first three quarters of 2021 from a year earlier, according to data released by the National Bureau of Statistics in October. But growth in the third quarter slowed to 4.9 percent. The two-year average was 5.2 percent.

After a slow expansion rate in 2022, growth will plateau, said Zhu Baoliang from the State Information Center. China’s economy still has strong resilience and momentum, which is reflected in the stable industrial chain and improved technological innovation capabilities, he said.

Next year will be the first for China’s economy to return to a relatively normal development path after the pandemic, and it will continue to face downward pressure, according to Li Wenlong at the Asia Institute of Digital Economy. Its performance also will depend more on domestic demand, new industries and new infrastructure investment.

Compared with the years before 2019, the growth pattern in 2022 will have significant changes: the digital economy will continue to show faster development, while the traditional industries will have lackluster growth, Li said, adding that the positive effect of the real estate sector and exports on the economy will also weaken.

Inflation

In addition, the economists see year-on-year growth in China’s consumer price index rising to 2.19 percent in 2022, from a prediction of 1.02 percent for this year. Meanwhile, the producer price index is expected to drop to 3.36 percent from 7.97 percent in 2021.

As the upward pressure on the PPI eases, overall inflation is expected to remain controllable, although the year-on-year CPI growth in the second half of 2022 may exceed 3 percent, said Lian Ping at Zhixin Investment Research Institute.

Monetary Policy

The economists expect a prudent monetary policy. Only five economists believed that China’s central bank will continue next year to lower the reserve requirement ratio for big financial institutions. In addition, although the US Federal Reserve is expected to raise the benchmark interest rate next year, all the economists predicted that China’s benchmark deposit interest rate is unlikely to change.

China will have a prudent and moderately loose monetary policy in 2022, said Tang Jianwei at Bank of Communications. Central bank policy will still be based mainly on the situation at home, Tang said, adding that the country will not follow the United States in tightening monetary policy. China must focus more on structural loosening, Tang added.

Fiscal Policy

As fiscal policy this year has not been ideal for promoting economic growth, the fiscal budget deficit ratio in 2022 is expected to be about 3 percent, Tang said.

The Federal Reserve’s withdrawal of loose monetary policy, new strains of the coronavirus and geopolitics will be the main external factors affecting China’s economic development, Li said.

There will be a lot of attention on the effects of the shift in US monetary policy on China’s foreign investment, exchange rate and prices, Zhu also noted.

Editors: Tang Shihua, Tom Litting