On March 4th, the annual meeting “Two Sessions” of China’s top political bodies commenced in Beijing. These sessions’ economic and legislative choices will serve as a road map for China’s economic and social development in 2022 and are thus critical for any player in the Chinese market. However, China’s economic status in 2022 is not optimistic despite its impressive performance last year.
China’s National Bureau of Statistics on February 28th issued a preliminary estimation of the country’s 2021 economic performance, which showed that the Gross Domestic Product (GDP) was 114,367 billion yuan ($18,087 billion) last year up 8.1% over the previous year.
During the meeting on Saturday, Premier Li Kequiang stated that China would set 2022’s economic growth at around 5.5%.
There are many opinions from analysts regarding the possibility of China’s target fulfillment.
Reuters, citing Zong Liang, the chief researcher at Bank of China, said, “It may be a bit difficult to achieve the target,” adding “we need to take some measures to achieve it.”
Bloomberg, citing Zhang Zhiwei, the chief economist at Pinpoint Asset Management Ltd., commented, “It will be a challenging year for the government to achieve this growth target.”
According to South China Morning Post, Nomura analysts led by Lu Ting (陆挺 Lù tǐng) are “skeptical” that China can attain 5.5% growth.
In an article published on February 21st, Milton Ezrati, a senior writer at Forbes, pointed out China’s colossal weakness. The “authoritarian regime” and “top-down economic direction,” which were believed to give more focus and purpose, turned out to be mortal weaknesses.
He referred to 3 striking features of China’s economic system:
The first is the regime’s massive intervention through its state-owned enterprises, controlling all crucial aspects of economic development;
The second is a seeming openness to foreign investments, but only as long as they support Beijing’s planners to achieve their development goals;
The last is how the previous two enable Beijing to harness China’s financial resources to serve centrally directed purposes.
Kevin Rudd, the Asia Society President, CEO, and inaugural President of the Asia Society Policy Institute, shared his view in a paper published on January 13th, 2022. He indicated multiple political, economic, and security challenges facing China. One problem is maintaining adequate economic growth to meet current employment needs. Another can be avoiding a financial crisis while restoring financial institutions to more sustainable debt levels. The next issue is transitioning from an investment-led growth model (which has produced total debt levels of nearly 300% of GDP) to one driven primarily by domestic consumption.
Larry Hu, the chief China economist at Macquarie, said in a note, “The better-than-expected GDP data doesn’t change the big picture: China’s economy is under multiple headwinds for now and a policy easing cycle is underway.”
Senior economic and trade analyst Alan Tonelson told VOA that such statistical growth in China’s economy would disappear in 2022. In addition, while China’s enormous real estate industry is still struggling, the bursting of the bubble in the sector will reduce various supplier industry needs.
In addition, ongoing trade barriers, rising tech sanctions from the United States, and weaker consumer spending due to the Covid-19 pandemic also appear to be holding back China’s economy. Besides, Russia’s invasion of Ukraine and its influence on the global economy have become an additional hindrance to China’s growth.