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Macroscope | China could come close to its 5.5 per cent growth target this year – with planning and a bit of luck
- While forecasters are downgrading China’s growth expectations for 2022, there’s scope to implement the right incentives to enable consumer demand and business investment to rally later this year
- It’s vital that Beijing’s recovery efforts focus on boosting household morale
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The global economy is heading into a perfect storm, buffeted by lingering Covid-19 concerns, the war in Ukraine and heightened inflation fears. These pose significant challenges for China and, judging by recent official hints, the 5.5 per cent growth target for 2022 might be beyond reach.
Consumer confidence is flagging as a result of the recent lockdowns, manufacturing activity has slipped into contractionary territory and the economy needs new policy measures to compensate. While economic forecasters are downgrading China growth expectations for 2022, it’s still early days, as there’s scope to implement the right incentives for consumer demand and business investment to rally later this year.
As the lockdowns ease and economic confidence recovers, growth will bounce back. In the aftermath of the 2020 Covid-19 crisis, China’s economy staged a major rebound and it can happen again with the right policies in place.
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Premier Li Keqiang has already conceded that the economy is stalling, hinting that growth is likely to fall short of the government target. By how much it undershoots is the key issue and clearly Beijing intends to pull out all the stops to stabilise the situation.
That will mean more monetary accommodation, easier credit conditions, greater fiscal expansion and keeping the renminbi competitive for as long as possible.
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If any major industrial nation has the capacity to whip up faster recovery momentum this year, China, as the world’s largest centrally planned market economy, should have the best chance of succeeding. It could come close to reaching over 5 per cent growth this year.
Beijing’s quest to contain the spread of Covid-19 infection has certainly taken its toll on the economy in recent months. The effect of major city lockdowns has left its mark on consumer confidence, which fell sharply to 113.2 in March from 120.5 in February – well down on the post-2020-crisis high of 127 in February 2021.
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