Economic growth in 2022 seen at 5.3%

A staff member works at a cloth production workshop of a new material technology company in Fucheng county, Hengshui, North China's Hebei province, Nov 30, 2021. [Photo/Xinhua]

Blue book on GDP forecasts stirs talk on prudent fiscal, monetary policies

China's economy is expected to grow around 5.3 percent in 2022 following an expected 8 percent growth this year, a top government think tank said on Monday.

According to the blue book on Chinese economy forecasts by the Chinese Academy of Social Sciences, policymakers should set a 2022 economic growth target above 5 percent, giving them more room to deal with challenges and focus on pushing reforms and boosting high-quality development.

The blue book's release coincided with a market eagerly waiting for clues to next year's economic policy agenda from the annual Central Economic Work Conference, which will be held later this month.

Li Xuesong, director of the Institute of Quantitative and Technological Economics, which is part of the CASS, said the recommended target of above 5 percent growth next year will leave some room for leeway, which will allow all the parties concerned to focus on promoting reform, innovation and high-quality development.

Citing the new blue book, Li said policymakers need to take more steps to shore up growth in 2022 amid downward pressure, with focus on moderately increasing countercyclical adjustments and enhancing cross-cyclical adjustments.

Countercyclical tools seek to offset possible negative effects of economic cycles like a slowing economy by adding stimulus to stoke growth. Such tools could involve tax, credit, monetary, government expenditure and industry policy.

Cross-cyclical tools like interest rate cuts/hikes and higher/lower investment in infrastructure underline small but prompt measures to achieve long-term goals, depending on whether the economy is slowing or accelerating currently.

"China's fiscal policy needs to remain proactive in 2022, with a focus on promoting its efficiency and quality, especially in fields like industrial upgrade and urbanization," Li told a news conference in Beijing. "And a prudent monetary policy should focus on stabilizing credit growth and dealing with inflation."

Given the grim and complicated economic situations at home and abroad, the government should make a big push to ensure stable prices and supplies, strengthen the industrial and supply chains, effectively prevent and control the COVID-19 pandemic, continuously boost technological innovation, effectively expand domestic demand, prepare to fend off risks and expand reforms and opening-up in key fields, Li said.

The blue book said the expected 5.3 percent growth in 2022 will bring the average annual growth rate forecast for the 2020-22 period to 5.2 percent, higher than the figure of 5.1 percent from 2020 to 2021.

The blue book estimated China's overall prices will rise moderately in 2022, with the producer price index and the consumer price index increasing 5 percent and 2.5 percent, respectively. And imports and exports in 2022 are expected to grow 10.4 percent and 6 percent, respectively.

"We expect the macroeconomic policy stance to ease in response to the downward pressure on growth," said Louis Kuijs, head of Asia economics at Oxford Economics, a think tank.

"We think policymakers have a bottom line for GDP growth, which is currently probably around 5 percent year-on-year… With our forecast seeing GDP growth dipping to 3.6 percent year-on-year in Q4(fourth quarter), we expect policymakers to take more steps to shore up growth in late 2021 and early 2022."

Kuijs said the overall real investment is expected to edge up in 2022 due to the rise in infrastructure investment and resilient manufacturing investment. "In this setting, we expect 5.4 percent GDP growth in 2022, following an expected 8 percent in 2021."

Kuijs estimated that export growth may slow in 2022, following an exceptional 2021 performance.

"While there have been efforts (in some developed economies) to 'decouple' from China, the relatively strong performance of China's export-oriented manufacturing sector during COVID is limiting the shift of production. China's global market share has risen in 2020-2021," he said.

"With foreign demand growth slowing and foreign spending shifting more to services, we expect China's export growth to fall to 5 percent in real terms, from 17.3 percent in 2021."