Kevin Yao

BEIJING (Reuters – China’s growth will slow to 5.2% in 2022 before stabilizing in 2023. A Reuters poll revealed this, while the central bank ramps up its policy easing to wardoff a sharper decline.

According to Reuters, the expected growth in 2022 would be less than 5.5% as predicted in an October poll. That highlights the multiple obstacles facing the world’s second-largest economic sector. They include a slowdown in property prices, a tightening of pollution regulations, tougher debt management, increased COVID-19 limits, and a crackdown against excessive borrowing.

According to the median predictions of 62 economists polled at Reuters, the gross domestic product (GDP), will likely grow by 8.0% by 2021. This is slower than the 8.2% increase seen in October’s forecast, but still represents the largest annual growth rate in a decade.

Analysts blame the solid growth of 2021 partly on the 2020 low base. That was when COVID-19, the first to emerge in China, shook the economy. The resultant government lockdowns paralyzed most of the country’s activities.

The momentum however slowed down significantly over the past year. According to the poll, GDP growth in the fourth quarter was likely 3.6%, versus a year before. That would mark the lowest pace of GDP growth since the second half 2020. It also slows from 4.9% in July through September.

According to the poll, quarterly growth will rise to 1.1%, up from 0.2% between July and September, according to the poll.

January 17th (0200 GMT) will see the release of Q4 2021 and December activity data by government officials.

Chinese leaders promised more support for slowing economies, who are facing an additional challenge due to recent spread of Omicron variant.

Tommy Wu, Oxford Economics, stated in a note that “To boost economic activity, it is important to provide sufficient support, particularly in H1, so this year’s growth doesn’t fall below Beijing’s comfort level.”

According to policy sources, China’s leadership aims to attain an economic growth rate of at least 5 percent in 2022. This is to maintain a low unemployment rate.

STEPS FOR MODEST EASING EXPECTED

The new year is expected to begin on a low note. However, the People’s Bank of China will announce more easing measures. It will probably favour injecting cash into the economy over cutting interest rates.

Policymakers focused last year’s attention on curbing the risks of property and borrowing, which contributed to the slowdown in economic growth. They have tried to prevent a worsening slowdown, which could lead to job loss ahead of the key Communist Party Congress later this year.

According to poll, the PBOC will likely reduce banks’ reserve requirements ratios (RRRs) by 50 basis point (bps) during the first quarter 2022.

Analysts believe the PBOC will cut the benchmark loan rate’s one-year loan prime (LPR) by 5 bps during the first quarter and then cut it by 5 bps again in the second.

On Dec. 15, the PBOC cut its RRR – which is the cash banks are required to hold in reserves – 50 bps. This was the second time the PBOC did this. This was followed on Dec. 20, by a five-bp reduction in the one year loan prime rate (LPR), which is the benchmark lending interest rate.

Politicians have pledged that they will increase fiscal support for the country, including speeding up local government bond issuances to stimulate infrastructure investment as well as planning further tax cuts.

According to the poll, consumer inflation could rise from 0.9% to 2.2% in 2021 to 2.2% in 2022. Then, it will ease to 2.1% by 2023.

(Follow this link to see other stories in the Reuters economic poll.

(Polling by Vivek Mishra and Devayani Sathyan in Bengaluru, Jing Wang in Shanghai; Reporting by Kevin Yao; Editing by Kim Coghill)