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Exports seen as growth driver, domestic market is weak

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According to analysts, China’s economy is expected to continue growing as exports are the main driver for the remaining year while the domestic market continues to slow down.

Mattie Benkink from Economist Intelligence Corporate Network in China, commented that Chinese leaders have stated for years they would like to see domestic consumption as the primary source for growth. 

But that is certainly not the case during this pandemic. China’s economy recovery is largely dependent upon its return to export-driven models, but consumption has really lagged,” she explained on CNBC’s Squawk Box Asia on Thursday.

Bekink stated that net exports accounted for the highest percentage of Chinese GDP growth in 2020 (compared to 1997) and that consumption has not recovered to pre-Covid trends, China’s National Bureau of Statistics said.

Despite global disruptions of supply chains during the pandemic, China’s trade surplus rose to $676.43 billion in 2021— up from $523.99 billion in 2020, and the highest on record going back to 1950, according to official data from Wind information.

“Exports will still continue to be a very important growth driver for the Chinese economy in 2022,” Zerlina Zeng, a senior credit analyst at CreditSights, told CNBC on Wednesday.

China’s central banking system will be open for business on Thursday cut its benchmark lending ratesAgain amid growing economic concerns, reduced the one-year loan prime rate as well as the five-year LPR on Thursday. Lending rates for households and corporate loans will be affected by loan prime rates.

It world’s second largest economy grew 8.1% in 2021According to data released by China’s National Bureau of Statistics Monday, industrial production increased steadily throughout the year. Analysts expected a faster increase in GDP for the fourth quarter than 4%.

China’s economy runs almost on two tracks. According to Steve Cochrane of Moody’s Analytics Asia-Pacific, the export-based economy works well, while domestic demand is very low,” he told CNBC’s. “Squawk Box Asia”This Wednesday

Lackluster spending in China

China’s zero Covid policies, however, will remain a significant drag on the economy. It has also prompted numerous travel restrictions in China. lockdown of Xi’an city in late December.

According to official data, Monday’s retail sales fell short of expectations. They grew 1.7% in December compared with a year earlier. 

Cochrane said that spending during the holiday season will be very limited due to the zero-Covid travel policy and difficulties in traveling tourism.

The Lunar New Year — which starts in early February this year — is China’s biggest holiday season, with millions of people crisscrossing the country to join loved ones for the Spring festivities.

With consumer sentiment uncertainChina will continue to ease its policies to stimulate the economy, even though hiring is still slow.

Zeng stated that “that is why the PBOC front loaded on monetary policy easing including policy rate reductions well as net infusion of medium to longer-term liquidity,” referring to Zeng. People’s Bank of China’s recent surprise move to cut its loan rates.

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On Monday, China’s central bank cut the borrowing cost of medium-term loans for the first time since April 2020. The reverse repurchase rates, another loan measure, was also reduced. Another 200 billion yuan (or $31.5 billion) was also injected by the PBOC into the bank system as medium-term liquidity.

Moody’s Cochrane said, “I would not be surprised, given the large amount of uncertainty in China’s economy. If there are continued liquidity additions and additional reductions in interest rates to shore up China’s economy.”

— CNBC’s Evelyn Cheng and Saheli Roy Choudhury contributed to this report

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