Kevin Yao

BEIJING (Reuters – China’s economy grew most likely at the slowest pace for 1-1/2 years in quarter four. The weaker demand caused by a property slump, strict COVID-19 regulations, and curbs on debt slowed growth. It is now more pressing than ever to ease the pressure on policymakers.

The Monday data is expected to reveal that the gross domestic product (GDP), grew 3.6% between October and December last year, compared with a previous year. It was the lowest growth rate since the second quarter 2020. Also, it slows down from 4.9% in third quarter. A Reuters poll revealed this.

The fourth quarter’s growth rate is 1.1%, up from 0.2% between July-September.

In 2021, the GDP is likely to grow 8.0%. This could be partly because of the low base in 2020 that was set by COVID-19. Also, stringent lockdowns had a negative impact on the economy.

Tuesday at 2 p.m. GMT the government will publish data about GDP, December activity, and other data.

The second largest economy in the world, which experienced a cooling trend over the last year, will face multiple challenges in 2022. These include persistent property weakness, and the new challenge presented by the Omicron variant, which has recently spread to the local area.

The government continues to clamp down on industrial emissions, and exports are expected to fall.

Prior to the key Communist Party Congress in late 2018, policymakers pledged to prevent a worsening slowdown.

Experts say the central bank plans to announce further easing measures, although it will prefer to inject more money into the economy than reduce interest rates too aggressively.

Reuters analysts polled expect more moderate easing by the central banks, which includes reducing the reserve requirement ratios of banks and the one-year lending prime rate (LPR), the benchmark rate.

According to ANZ analysts, they believe that Monday’s central bank could reduce the interest rate for its medium-term loan facility (MLF).

The policymakers also promised to increase fiscal support to the economy by speeding up special bonds issuances at local governments to encourage infrastructure investment, and planning for more tax cuts.

Analysts at Natixis stated in a note that they might not see the full effect of fiscal and monetary easing until the second half 2022 because of transmission delays.

The recent monetary easing, as well as the stabilization in PMI (factory activities), have pointed to such an indication. However, more effort is needed to increase fixed asset investments.

The poll suggests that growth will slow to 5.2% in 2022.