China’s economy expanded by 4.8% in the first three months of 2022, according to official statistics. Nevertheless, according to official figures released on Monday, growth in the first quarter was much lower than the stated target of 5.5 percent for the full year set by the ruling Communist Party. According to figures released by the National Bureau of Statistics (NBS) on Monday, the country’s gross domestic product increased by 4.8 percent year on year during the months of January to March, accelerating from a 4 percent gain in the fourth quarter of the previous year.
According to Indian accounting standards, the fiscal year runs from April 1 to March 31. In China, on the other hand, the fiscal year is the same as the calendar year, and vice versa. As a result, the Chinese financial year is computed from January 1 to December 31 each year.
Although China expressed cautious optimism about its economic development and its ability to lead the post-pandemic global economic recovery, the country also appeared to recognise the risks faced by increased disruption from geopolitical conflicts in the region.
According to the government work report presented to the annual parliamentary assembly on Saturday by Premier Li Keqiang, China’s gross domestic product (GDP) growth target for 2022 is “about 5.5 percent,” which is at the top end of market expectations.
However, it also issued a warning about the rising strength of headwinds.
The Chinese premier didn’t mention external challenges such as Beijing’s rivalry with the United States or market disruptions caused by Russia’s invasion of Ukraine, but he did say that China had
enough experience to deal with major risks and that it had retained market potential, but that significant efforts would still be required to achieve the goal.
As a result of new Coronavirus outbreaks, which forced the closure of key industrial areas, including the financial capital of Shanghai, the economy grew at a slower rate than expected.
There has also been a slowdown in the Chinese economy as a result of tougher government limits on the use of debt by the country’s massive real estate industry. According to The Associated Press, forecasters have stated that meeting this goal without more government stimulus expenditure will be difficult (AP).
Retail sales in China declined by 3.5 percent year on year in March, according to official figures. According to a report published in China’s official media, the Global Times, this was the first decline since August of this year.
Retail sales are often regarded as the most important indicator of consumer spending.
According to the Global Times, observers of China’s economy have also noted
“unprecedented downward pressure” on the country’s economy since the first quarter of 2020, which they attribute to “coronavirus flare-ups, supply chain snags, and external uncertainties arising from the Russia-Ukraine conflict.”
As the world’s second-largest economy ramped up supportive measures to shore up growth in the face of strong headwinds, China set its gross domestic product (GDP) growth target for 2022 at around 5.5 percent, indicating that it will focus on slower growth in order to stabilise its economic fundamentals this year.
According to Fu Linghui, a spokesperson for the National Bureau of Statistics,
“we must be mindful that the domestic and international environments are getting increasingly complicated and uncertain, and that economic development is confronted with substantial obstacles and hurdles.”
With regard to the pattern of the next stage, he stated that “despite some pressure on the economy in the short term, when looking at the economy as a complete year, China’s economy is likely to retain a recovery trend of development.”
Fu Linghui, spokesperson of the National Bureau of Statistics
China’s central bank reduced its reserve requirement ratio (RRR), or the amount of cash that banks are required to maintain in reserve, in a much-anticipated action last Friday in order to support the country’s weakening economy in the face of mounting headwinds.
For the time being, even the most pessimistic experts predict that China’s economy would grow by more than 7.5 percent this year, which is a pretty high rate for an economy of China’s size. Beijing has set a target of doubling the country’s gross domestic product from its current levels by 2035, which would imply yearly growth of almost 5%. That may prove to be a useful starting point for policymakers.
According to Bo Zhuang, China economist at Loomis Sayles Investments Asia, the country’s real estate investment could fall by 10% in the first half of next year while still achieving annual growth of 5% because the country’s credit cycle is nearing its bottom and fiscal policy could tighten ahead of a crucial Communist Party congress in the autumn.
He thinks that Beijing would set a growth target of about 5.5 percent for the country next year.
Nonetheless, the recent decline, particularly paired with concerns over Evergrande, is leading some analysts to question if they are being overly optimistic about the stock’s near-term prospects.
The analysts at Bank of America proposed a “bearish scenario” in which the real estate market undergoes a disorderly adjustment in which property prices fall by 10%, reducing sales and discouraging banks from financing to the sector.
According to this scenario, growth might be as low as 7.5 percent this year and 2.2 percent in 2022, according to the World Bank.
The other danger is that China’s policymakers may find it difficult to convert the economy back into growth gear if they believe it is necessary. The analysts at Citigroup, led by Xiangrong Yu,
observed that energy shortages, which are already constraining industrial production, will make it more difficult to cushion growth by increasing investment in infrastructure in the future. They said that such a programme would only be effective next year if the power shortage was alleviated.
As a result, local governments are having difficulty identifying feasible projects to engage in, and property developers’ inability to obtain financing has caused them to delay land purchases, which threatens to erode a $1 trillion revenue stream for local governments.
“Property and energy issues will continue to have an impact on growth in the fourth quarter,” said Houze Song, a China economic researcher at the Paulson Institute, a think tank based in the United States. In the short term, “it is likely that full-year growth will conclude below 8 percent.”
Published By – Chittajallu H S Kumar
Edited By – Vanshika Sahu
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