China’s economy is expected to recover this year (JP Morgan)

Chinese economic activity, which has been weighed down by multiple factors including the resurgence of COVID-19 cases, is expected to recover this year. The Asian giant, the world’s second-largest economy, has set a growth target of 5.5% for 2022, which has drawn some skepticism around the world.

However, JP Morgan, in its latest equity strategy report, said it expects China’s economy to perform better this year than last, especially compared to the more optimistic current projections. because basic effects are much easier now.

“China’s policy stance has shifted from restrictive at the start of last year to accommodative more recently. This should help improve the risk/reward ratio for Chinese equities and stabilize the growth outlook. Notably, Chinese M2 appears to be bouncing back,” JP Morgan analysts said.

The latest Purchasing Managers’ Index data showed China’s business activity, although still in contractionary territory, edged up to 41.4 in May from 36.2 in April, some of the restrictions related to the “zero-COVID policy” having been lifted.

Additionally, business expectations for the 12-month production outlook improved in May, hitting a three-month high. A number of companies were hoping for a strong recovery once the virus was contained and restrictions were fully lifted.

According to JP Morgan, in the past 25 years, China has missed growth numbers only twice, and that by just 10 basis points each time.

“China’s credit impulse bottomed out late last year and demand for steel, among other things, waned,” the report added.

Meanwhile, Fitch Ratings in May cut its forecast for China’s GDP growth in 2022 to 4.3% from 4.8%. It revised its growth forecast for 2023 slightly upward to 5.2%, from 5.1%.
Source: Reuters (Writing by Brinda Darasha; Editing by Daniel Luiz)

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