China’s economy expected to maintain significant growth in 2022, 2023
China’s economy slowed to 0.4% growth from April to June due to sudden pandemic-induced shutdowns in Shanghai, Changchun and other Chinese cities. It is therefore imperative to unify national coronavirus prevention and control measures while stepping up efforts to accelerate domestic consumption and the construction and sale of urban housing in the second half of the year if the government is to achieve GDP growth. relatively strong for 2022.
Mathematically, China must grow by at least 7.8% from July to December if the country is to meet the 5.5% growth target set in March at the annual meeting of the National People’s Congress (NPC). . Most economists would find it very difficult to achieve.
But a growth rate above 4.5% will continue to make China the real engine of the world, while the United States, Europe and other major developed economies suffer from stagflation.
Inspirational news has recently arrived for Chinese policymakers. Industrial production growth rebounded to 4% year-on-year in June, after falling -2.9% in April and growing 0.7% in May. The growth rate for July and August is expected to exceed 6.5%. In addition, fixed asset investment recorded a 5.8% year-on-year growth in June, driven by a strong recovery in investment in highways, high-speed railways, bridges, subways, ports, reservoirs and other infrastructure projects.
Most economists expect China’s economy to continue to improve in the third and fourth quarters with growth of up to 6%, provided the government’s gradual stimulus policy bolsters broader domestic consumption and, in particular, propels the growth of the urban real estate sector. Megacities like Beijing, Shanghai, Guangzhou Shenzhen, Chongqing, Suzhou and Hangzhou are expected to keep their alert levels high to avoid widespread virus infections and citywide lockdowns.
The country’s central bank is expected to maintain relatively loose monetary policy until the end of 2022, with no changes to the benchmark prime rate (LPR) or reserve requirement ratio (RRR) in the coming months, although other central banks are under pressure to raise rates to curb runaway inflation.
Chinese policymakers should step up support to boost urban housing construction and top tech companies, including internet-based platforms, such as Tencent, JD, Meituan, Didi and Alibaba, to maintain the vitality of goods and the service economy.
The collapse in urban housing construction since 2021 has been a major contributor to the economic slowdown. In the first half of 2022, real estate sales fell by more than 20%. Official data shows that the value of the real estate sector fell 7 percent year-on-year to 18.6 trillion yuan at the end of June this year.
As real estate has a long industrial chain that encompasses steel, cement, electrical appliances, furniture and other parts of the value chain, the growth of the industry can drive the consumption and development of the whole of the industrial chain, and vice versa, its collapse will therefore impact the entire industrial chain.
What caused the crisis in the real estate sector? It is the growing indebtedness of promoters. Measures to control the indebtedness of real estate developers are necessary to limit financial risks. But the drastic decline in housing credit and capital liquidity has led to a sharp decline in housing sales in cities, which is seriously draining the overall economy. If the real estate sector that serves as a financial accelerator falters, the whole economy will feel the pressure. It is therefore important that the government take effective measures to stabilize the real estate sector by easing credit constraints on developers.
The economic downturn has affected the job market for the country’s youth. According to official data, the youth unemployment rate reached 19.3% in June, despite an improvement in employment for the 25-59 age group. The pressure on the youth labor market is expected to increase in the second half of the year as more than 10 million new university graduates are about to enter the labor market.
On domestic consumption, policymakers need to redouble their efforts to bolster household confidence in their future jobs and incomes. Retail sales growth eased back to 3.1% year-on-year in June, after falling precipitously by 11.3% in April and 6.7% in May, due to aftershocks from the pandemic shutdowns.
Nevertheless, China’s export machine continued to run at full speed, with nominal export growth accelerating to 17.9% year-on-year in June from 16.8% in May. China’s share of world exports is expected to reach 14.5% in 2022 and 15% in 2023.
In summary, China’s economy, although facing heightened global uncertainty and numerous headwinds caused by various geopolitical tensions, will accelerate in the second half of the year and is expected to register significant growth this year that will be the envy of other major economies around the world. . And next year could be even rosier.