Kevin Yao

BEIJING, (Reuters) – China’s expected growth of 8.2% in 2018 is projected to fall to 5.5% by 2022, a Reuters poll revealed. However, the central bank may remain cautious regarding monetary easing because it worries about high property and debt risks.

According to 56 economists polled, Gross Domestic Product (GDP), in the third quarter, likely grew by 5.2% compared with a year ago. This was slowing down from 7.9% in April-June.

This would represent the lowest reading for a year and a slowing of the record 18.3% growth in the quarter. The year-on-year rate of expansion was severely distorted by the COVID-induced slump that occurred in the quarter beginning 2020.

Wang Jun, Zhongyuan Bank’s chief economist said that “the downward pressure could continue for up to three quarters.”

“We see that policy easing is very restricted. It is unlikely that large-scale policy easing will occur in the fourth quarter.

While the second-largest country in terms of economic output has recovered from the pandemics, signs are beginning to show a slowdown. China’s economic prospects have been dimmed due to falling factory activity, softened consumption and slowing real estate sector.

The surprising thing is that the country’s September export growth was actually faster than expected, despite the fact that there has been a solid global demand to counter some of the economic pressures.

In mid-July 2012, the People’s Bank of China relaxed its cash requirements for banks. This was just in time to deal with an increase in COVID-19 domestic cases.

The poll revealed that quarterly growth will be 0.5%, down from 1.3% during the second quarter.

According to the poll, economists expect the economy will grow 8.2% in 2018. This would be slower than July’s 8.6% forecast. However it would still represent the most significant annual growth for a decade. Pandemic-hit 2020 saw the economy grow 2.3%.

At 5.5%, the forecast for 2022 growth remains unchanged.

China set a target of doubling its annual GDP in 2018, which is lower than analysts expected. It gives policymakers more flexibility to manage uncertainties.

MODEST POLICY EASING IS EXPECTED

The PBOC could be under pressure to relax its policy if there is further economic slowdown. However, analysts warn that concerns about debt and the property bubble risk may prevent the PBOC from taking any significant steps. The central bank could face problems if there is a rise in producer prices, but consumer inflation remains stable.

The poll indicates that the PBOC would likely maintain banks’ reserve requirements ratio (RRR), unchanged for the fourth quarter. It will then cut another 50basis points in 2022’s first quarter. A July poll predicted a fourth-quarter cut.

China’s one-year loan rate (LPR), analysts expect to remain at 3.85% through June 2022. Since May 2020, the LPR has been unchanged.

To spur infrastructure investment, and to help grow the local economy, local governments are increasing special bond issuance.

According to data from the finance ministry, local governments have issued special bonds worth 1.84 trillion Yuan ($285.6 million) between January and August. This accounts for roughly half the annual quota.

The consumer inflation rate will slow down from 2.5% to 1.0% in 2020 to 1.0% in 2021. But it could increase to 2.3% by 2022 according to

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($1 = 6.4435)

(Polling by Mr. Manzer Hussain in Bengaluru, Devayani Sathyan and Jing Wang In Shangha. Reporting by Kevin Yao. Editing by Jacqueline Wong.