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Saturday, March 25, 2023

China’s GDP set to grow by around 5.5% in 2022 despite uncertainty

File photo: VCG

The easing of fiscal and fiscal policy is expected to be the new approach taken by China’s policymakers to start a significant slowdown of the world’s second-largest economy, which swelled to an impressive $18 trillion in 2021. Riding on a favorable tide, which includes low inflation at home and unprecedented levels of support from 1.4 billion people, the government should aim for another year of relatively high growth.

A clear reminder is that policymakers should continue to underpin rural development by encouraging farmers to raise livestock and grow vegetables, fruits and other produce to keep inflation at bay.

Only when consumer price hikes are halted within a high of 2-2.5 percent, will China have the leeway needed to ease policy in 2022. Right now, inflation in Europe is at a 30-year high, with both the UK and Germany recording more than 5 per cent. Inflation In December, the US saw its inflation hit a 40-year high of 7 percent in the same month.

In addition to abundant market supplies of pork, eggs and other foodstuffs, China launched a property sector reform campaign in the second half of last year to reduce debt levels of major property developers, which, along with housing prices- Also reduced the house rent. As a result, China was able to control its annual inflation at just 0.9 percent in 2021, despite rising global prices of energy and other raw materials, which now lays the foundation for counter-cyclical macro policy adjustments.

In a bid to spur economic growth, China’s central bank on Thursday cut two benchmark lending interest rates to help stabilize the country’s cooling economy and avoid a hard landing. And, during the annual legislative session of the National People’s Congress (NPC) in early March, a new package of fiscal spending plans was expected to be approved, setting the agenda for another round of strong government-led capital investments in the country. Chances are.

The People’s Bank of China, the central bank, lowered the one-year loan prime rate (LPR), on which most new and outstanding loans are based, from 3.8 percent to 3.7 percent, and the five-year loan prime rate, which is one of the mortgages. for the reference rate from 4.65 percent to 4.6 percent.

If no prompt measures are taken by China’s central authorities, the risk of a hard landing could increase. The world’s second-largest economy slowed to a growth rate of 4.0 per cent in the last quarter of 2021, although strong growth in the first six months pushed full-year growth to 8.1 per cent.

In 2022, accelerated monetary easing and fiscal stimulus programs are likely to be completed – such as further cuts in the LPR and reserve requirement ratios of commercial banks, as China now faces a flurry of headwinds including global supply constraints, ongoing tariffs . Technology war with America and slowdown in property sector at home.

In addition, policymakers are closely watching the course of the pandemic for its impact on domestic consumption, which will be an important predictor of economic growth this year. Sporadic coronavirus outbreaks have led to strict restrictions in many big cities such as Tianjin and Xi’an, and increased precautions across the country have dampened demand for services.

This year is very important for the people of China. China’s policymakers are mandated to maintain stable GDP growth and employment rates in 2022, which marks the country’s efforts to deepen structural reforms and make new strides in technology competition with the US. And, the most important 20th National Congress of the Communist Party of China is scheduled to be held in Beijing in autumn.

China’s economy grew in size last year to 114.4 trillion yuan ($18 trillion), accounting for nearly 80 percent of the US GDP, which is projected to grow by 5.7 percent to $22.5 trillion in 2021. The Chinese government’s strong investment in infrastructure, such as high-speed rail expansion and 5G broadband, along with the country’s sizable manufacturing industry and its unparalleled export potential, are two key drivers of China’s busy growth.

Although Chinese government officials have repeatedly stressed that they are not interested in whether and when China’s GDP will overtake the US in nominal dollar terms, many Chinese economists and laymen The policy makers are expected to work more diligently and constructively to accelerate the pace. Why increase?

China’s GDP is expected to grow by 5.5-6.0 percent in 2022, excluding major natural disasters. So far, nine Chinese provincial-level regions have set their GDP growth targets above 6 percent this year, while powerhouse economies such as Guangdong, Beijing and Shanghai kept their growth above 5 percent.

The Chinese Academy of Social Sciences (CASS), a leading government think tank, estimates that the country can achieve at least 5.5 per cent GDP growth in 2022, which has kept pace with the general public.

Last week, Liu Guoqiang, vice governor of the People’s Bank of China, said the central bank “must be quick, look ahead to operations, move ahead of the market curve, and respond to general market concerns in a timely manner.” Manner”. The bank then came out with several items of policy front-loading, including a reduction in prime rates of one-year and five-year loans, which would reduce business borrowing costs and work to bail out the cash-starved property sector. could. From its woes, soon.

Policymakers set some “red lines” to curb the debt levels of property developers, leading the property sector to sharply improve significantly with lower home sales and new land development. Several major developers, such as the Evergrande Group, have had difficulties paying back loans and bonds. Earlier this year, authorities prompted lenders to increase mortgage loan amounts to revive the sector.

The author is the editor of Global Times. [email protected]

World Nation News Desk
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