Stable course charted for economy

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Lanterns attract consumers at a festival celebration product market in Hai’an, Jiangsu province (ZHAI HUIYONG / FOR CHINA DAILY)

China’s economy is likely to centre on one word in 2022, stability – identified as the top priority at the tone-setting meeting attended by top policymakers in Beijing in December 2021.

According to analysts, while the emphasis on stability is nothing new in the country’s economic policy, prioritising stable growth does not mean returning to the old development path.

They said pushing high-quality growth and accelerating construction of a new development pattern, with the dual-circulation paradigm as the core idea to fully unleash the economy’s potential, will continue to be a key theme of economic policy in 2022.

This development model means that domestic circulation, or the internal cycle of production, distribution and consumption, will be the mainstay of economic development. The domestic and foreign markets, or international circulation, will reinforce one another to promote the smooth, two-way flow of goods and capital. The dual circulation idea was first put forward in May 2020 by the central leadership.

Attention is now focusing on how policymakers will tackle near-term headwinds to shore up growth without sacrificing long-term goals of pushing high-quality expansion through structural reforms and fostering a more equal and inclusive economy by promoting common prosperity.

Han Wenxiu, a senior official with the Central Committee for Financial and Economic Affairs, said China’s GDP in 2021 is expected to exceed 110 trillion yuan (£12.7 trillion), while GDP per capita is likely to surpass $12,000 (£8,800) moving closer to the threshold of a high-income economy defined by the World Bank.

Workers at the production line of a machinery manufacturing company in Huzhou, Zhejiang province (XIE SHANGGUO / XINHUA)

However, economic recovery has not been plain sailing, with a series of challenges weighing heavily on the country’s growth momentum from the second half of 2021.

GDP growth slowed in the third quarter to 4.9 per cent year-on-year and may further decelerate in the fourth quarter to about 3 per cent, according to economists’ predictions. Such a slowdown had not been expected, since the economy saw an 18.3 per cent rebound year-on-year in the first quarter of the year.

Adverse factors dragging down economic growth include a series of Covid-19 outbreaks that have dented the recovery of domestic consumption, especially activities in the offline services sector. There has also been a faster-than-expected slowdown in the property market, posing a threat to the country’s financial stability, along with a shortage of semiconductors, and an energy crunch that hampered industrial production. In addition, soaring raw material prices have eaten into corporate profits.

At the Central Economic Work Conference held in Beijing in December 2021, as top policymakers mapped out objectives for 2022, they suggested stepping up fiscal stimulus measures and accelerating public spending and the issuance of local government bonds to better unleash domestic demand potential.

Ning Jizhe, deputy head of the National Development and Reform Commission, said there is still insufficient domestic demand, which means the potential for this must be fully explored.

Increased infrastructure investment and additional tax and fee cuts for companies can be expected. The government will expand effective investment in programmes such as new infrastructure, new urbanisation, hydropower and transportation projects, and speed up progress in other projects outlined in the 14th Five-Year Plan (2021-25), Ning said.

Kristina Hooper, chief global market strategist at asset management company Invesco, said improving people’s well-being and promoting common prosperity will remain key themes in the government’s policy for the foreseeable future, which could boost domestic consumption, especially among lower-middle income groups.

Kang Yong, chief economist at KPMG China, said the nation’s household consumption will further recover, but the pace of this improvement could still be affected by measures taken to control the pandemic.

Analysts said the top leadership has emphasised the need for better policy coordination to support economic development. Policy fine-tuning and improved implementation in key sectors can be expected, and to avoid unintended negative consequences for the economy, there are likely to be fewer regulatory surprises in fields such as anti-monopoly, deleveraging and decarbonisation.

Zhou Lanxu contributed to this story.

Previously published on Chinadaily.com.cn