China braces for weaker growth

All in its desire to compete with New York even in symbols, Shanghai also has its Times Square, its crossroads where, on a giant screen, economic information and advertising for luxury brands alternate. At the beginning of January, when the rain, the grayness and the cold seem to combine to discourage consumers from shopping, the azure blue screen proudly displays the progress of the Chinese gross domestic product (GDP) during the first three quarters of 2021 : + 9.8%. But the curves scrolling at the bottom of the screen are less optimistic. After a spectacular surge in the first quarter of 2021 (which should be compared to the first quarter of 2020 when the country was almost at a standstill), growth continues to slow down.

Its exact level for 2021 will not be known until January 17. According to experts, it should be around 8%. On the other hand, the 2022 vintage, without being catastrophic – a year of congress of the Chinese Communist Party (CCP) cannot be – will be clearly below: 5.1%, according to forecasts published by the World Bank on December 21, 2021. This institution identifies two main risks: a resumption of the Covid-19 epidemic which could lead to “Greater disruption in economic activity” and one “Severe and prolonged slowdown in the highly indebted real estate sector”.

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Without being pessimistic, the World Bank is therefore cautious. Unlike Morgan Stanley. The American bank, which forecasts Chinese growth of 5.5% this year, sees four reasons for optimism: the authorities are implementing a more accommodating fiscal and monetary policy, the real estate crisis is not resolved but seems On the way to being brought under control, the government also appears to be showing flexibility in addressing the electricity shortage the country suffered in the fall and exports are expected to remain strong in 2022.

Growth more driven by exports

The latest indicators are rather encouraging. In December 2021, industrial activity would have been the highest in the second half of the year. The Caixin PMI manufacturing index, published on January 4, in fact jumped unexpectedly to 50.9, while experts were expecting just a 50, the figure which limits the increase in activity. Published on January 6, the same index for services has increased from 52.1 to 53.1. Order books are filling up again.

But, contrary to what the PCC wants, growth seems to be driven more by exports than by consumption. The government predicts that trade (exports and imports) will have reached 6 trillion dollars (5,300 billion euros) in 2021, making a jump of 24% compared to 2019, before the pandemic. Note that almost half of exports are now intended for emerging countries. For Henry Gao, Singapore-based international trade specialist, this proves that “The ‘new silk roads’ work”.

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China braces for weaker growth

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