China’s annual political drama “two sessions” kicked off this weekend. At this annual meeting of the National People’s Congress/Chinese People’s Political Consultative Conference, how China can set and achieve its economic growth goals amid the disruption of the global economy by the new crown epidemic has become the focus of the international community. Economists in both the United States and China said that China’s economic situation in 2022 is not optimistic.
On the eve of China’s “Two Sessions”, Chinese media China Global Television Network (CGTN) reported that with the exception of China’s southernmost province, Hainan, which has set a GDP growth target of around 9% this year, the average growth target for other provincial-level regions is around 6%. %, generally below the 2021 target.
Economists also admitted that although China’s economic performance in 2021 is impressive, it may be very difficult to maintain the previous economic growth momentum.
Huang Yiping, a professor and associate dean of Peking University’s National Development Institute, said more detailed policy plans could be seen at the National People’s Congress, which opens over the weekend, and there could be a new set of growth targets for this year.
“I hear people still arguing between 5% or 5.5%, I don’t know what the final number will be,” he said. “But my own feeling is that even with policy action, it’s not a big deal for our (China) Economically, even hitting a growth target like 5 percent is still a very tough job.”
Huang Yiping made the remarks at a virtual seminar co-hosted by the National Committee on U.S.-China Relations (NCUSCR) and Peking University. He said that China’s economy has recovered very strongly from the new crown epidemic. The driving force comes from two aspects: one is the growth of exports, and the other is investment activities in infrastructure and real estate. However, investment in other areas of the economy, such as manufacturing, has been relatively slow, and consumption has also remained weak.
China’s economic situation in 2022 is not optimistic
China’s economy will grow at an impressive 8% in 2021. However, after entering 2022, international economic analysis institutions generally lowered their expectations for China’s economic growth. Nomura and Goldman Sachs both forecast China’s economic growth to slow to 4.3% in 2022.
As early as December 2021, China’s economic forecast released by the Organization for Economic Cooperation and Development (OECD) said that although China’s economic growth will reach 8.1% in 2021, it will slow down to 5.1% in 2022 and 2023. .
At the same time, Chinese economic experts in the United States have noticed that China’s economy will recover rapidly in 2021 against the backdrop of overseas economic reopening and strong investment, as well as strong exports; The growth situation of China’s economy in 2022 is not optimistic.
According to Dr. Derek Scissors, a senior fellow at the American Enterprise Institute, a Washington-based think tank, China’s official GDP growth in the second half of 2021 is only 4% year-on-year. Most forecasters see an overall improvement in 2022 compared to then, but the first quarter of the year is off to a soft start. “It is therefore almost impossible for China’s GDP growth rate to approach 8 percent again in 2022,” Squires told VOA by email.
Alan Tonelson, a senior economic and trade analyst and founder of the announcement policy blog RealityChek, also said that if only because of the so-called “baseline effect” that seriously affected economic performance in 2020, China will not be able to do so this year. Slower growth than last year seems inevitable.
“In other words, growth in 2020 is so low due to the impact of the coronavirus, China’s own zero-tolerance defense policy, and the recession in foreign markets China relies heavily on; The rebound is destined to look exceptionally strong,” he said.
Obstacles to China’s Economic Growth
Analysts believe that the slowdown in China’s economy and the difficulty of achieving its previous high growth is because Beijing faces many potential obstacles in 2022, as well as the inherent weaknesses of the Chinese economy. “Forbes” magazine (Forbes) published an article on February 21, senior writer Milton Ezrati (Milton Ezrati) said that China’s economy has a huge weakness.
Ezrati believes that Beijing’s highly centralized government and top-down economic orientation are not what many see as an economic development advantage, but are in fact “a huge, perhaps Achilles’ heel” that makes China’s economic development Lack of resilience and flexibility.
The three weaknesses he refers to are: the government’s massive intervention in the economy through its state-owned enterprises, and by intervening to control all important aspects of economic development; openness to foreign investment, based on whether it serves the government’s goals; the government All financial resources can be mobilized at will to serve the goals of the central government.
Chinese economic expert Sjian Dao believes that China has multiple obstacles to improving its economic performance. First of all, exports have done well last year and there will be no further improvement. Second, the new coronavirus zero-tolerance epidemic prevention policy has suppressed consumption, and even with the relaxation of the zero-tolerance policy, consumption will not recover immediately. Chinese consumers have been cautious about spending. Third, given existing debt levels, the central government has reason to be skeptical of strong stimulus.
“So the central government is more concerned with keeping GDP growth steady above 4% than trying to push it above 6%,” Scissor said.
Economic experts generally believe that economic growth is primarily driven by key components such as exports, investment, production and consumption. If the Chinese economy recovered from the COVID-19 pandemic relatively early and showed a very strong rebound, it was mainly driven by two factors. The first is the growth of exports, the second is the growth of investment, and a considerable part of investment activity is infrastructure spending, especially in real estate investment is very strong. These are the key drivers of China’s economic recovery.
However, Huang Yiping, an economist at Peking University, noted that investment in other parts of the Chinese economy, such as manufacturing, has been relatively slow, and consumption in China is particularly weak right now. He believes that the real question facing China’s economy in the coming year is: what is the driving force for China’s economic growth under the stimulus of macroeconomic policies. China’s exports are particularly strong right now, but that would be unsustainable; part of the reason why China’s exports are strong is because China brought the coronavirus under control relatively earlier than some other countries.
“We are producing goods on behalf of some other countries. So if the COVID-19 situation stabilizes, the additional stimulus from export growth may gradually ease and disappear,” Huang said.
Tonelson, a senior economic and trade analyst, told VOA that such statistical growth in China’s economy will disappear in 2022; while China’s huge real estate industry is still struggling; the needs of the supplier industry.
“On the other hand, persistent trade barriers and mounting tech sanctions from the U.S., as well as consumer spending still appear to be held back by insecurities stemming from the Covid-19 pandemic. In addition, in recent weeks, Russia’s invasion of Ukraine and Its inflationary impact across the global economy has become an additional impediment to growth in China,” Tonelson said.