In 2021, China’s economy experienced many “exceeded expectations”, with both unexpected difficulties and unexpected surprises. The economic foundation became stronger and stronger, realizing a good start in the 14th five year plan.
Recently, Xinhua News Agency surveyed the chief economists of 37 institutions on the “economic outlook for 2022” questionnaire, reviewed the economic situation in 2021 and looked forward to the economic development in 2022. Economists generally believe that despite multiple pressures, China’s economy has great resilience, room for maneuver and policy space. China’s economy can still maintain an overall stable operation in 2022. There are three main driving forces for promoting economic growth: first, investment in infrastructure construction is expected to rebound; Second, manufacturing investment is expected to continue to increase; Third, consumption is expected to continue to pick up.
reinforcement of China’s economy in 2021
As the first year of the 14th five year plan, China calmly responded to the changes in the century and the epidemic situation in the century in 2021, achieved new results in high-quality development, and achieved a good start in the 14th five year plan.
Throughout the year, the economic operation environment in 2021 is extremely complex, which is manifested in many “exceeding expectations”, including both unexpected adverse factors and unexpected surprises.
First, the epidemic repeatedly exceeded expectations, disturbing the sustained economic recovery. It was originally expected that vaccination would ease the epidemic situation, but with the variation of covid-19 strain and the gradual unsealing of countries, the global epidemic rebounded strongly from March to April and July to August. At present, with the advent of winter, the global epidemic is forming the fourth peak. China insists on “dynamic clearing”, and the epidemic situation is sporadic and repeated from time to time.
Second, foreign demand exceeded expectations, and exports became a bright spot in China’s economy in 2021. It was originally expected that the unsealing of various countries would ease the overseas supply constraints and then affect China’s exports. However, in the economic recovery of developed countries, the demand recovery was faster than the supply recovery. Export-oriented Southeast Asian countries became the hardest hit areas in the anti attack of the epidemic from July to August. The substitution effect made China’s exports fill the market gap and grow faster than expected. This is because China has a complete range of industries The embodiment of the advantage of “world factory” also reflects the competitive advantage formed by China’s successful epidemic control.
Third, the price rise of industrial raw materials and energy exceeded expectations, squeezing the profits of downstream industries. Strong exports have driven industrial production beyond expectations, driving a sharp increase in the demand for industrial raw materials and electricity. The mismatch between supply and demand has led to a sharp rise in the prices of energy and raw materials. In addition, developed countries generally adopt loose monetary policies in response to the epidemic, pushing up international commodity prices and increasing imported inflationary pressure.
Fourth, the real estate downturn has increased the downward pressure on the economy. The real estate boom is an important engine for China’s economic recovery from the second half of 2020 to the first half of 2021. During the period, to prevent the expansion of real estate bubble, China insisted on “housing and housing speculation” and tightened the financing of real estate further.
Facing the complex external environment of China, China’s economy has achieved sustained recovery and stable operation in 2021. GDP in the first quarter increased by 18.3% year-on-year, with an average growth of 5.0% in the two years; GDP in the second quarter increased by 7.9% year-on-year, with an average growth of 5.5% in the two years; GDP grew by 4.9% year-on-year in the third quarter and 4.9% on average in the two years.
The two-year average growth rate is the growth rate achieved by overcoming difficulties in the repeated impact of the epidemic; It is the growth rate achieved on the basis of continuously optimizing the economic structure, promoting the transformation of low-carbon energy, strictly controlling the risk of local debt and accelerating industrial governance; It is a growth rate achieved under the condition of maintaining policy concentration, not engaging in “flood irrigation” and still retaining many options in the policy toolbox.
China’s economy is very resilient in 2022
Disturbed by objective factors such as epidemic situation and flood situation and affected by the government’s active cross cycle regulation, China’s economic development is facing triple pressures of demand contraction, supply shock and weakening expectation. Economists generally believe that with the improvement of infrastructure, manufacturing and consumption in 2022, the driving force of China’s economic upward is expected to increase, and China’s economic development still has the fundamentals of strong toughness and long-term improvement.
Infrastructure investment is expected to pick up. Recently, the policy has increased support for infrastructure investment. Economists generally believe that this will help the recovery of infrastructure investment in 2022. The meeting of the Political Bureau of the CPC Central Committee on July 30, 2021 proposed to accelerate financial investment and ensure the formation of physical assets in the field of infrastructure in the year and at the beginning of 2022. The central economic work conference in 2021 also clearly requires to ensure the intensity of fiscal expenditure, accelerate the progress of expenditure, and moderately advance infrastructure investment.
Orient Securities Company Limited(600958) Shao Yu, chief economist and assistant president, and Ju Houlin, director of Galaxy Securities Research Institute, both said that the upward investment in infrastructure construction in 2022 is a deterministic event. In the future, the investment field is expected to be biased towards the traditional railway and highway fields, as well as the emerging industrial upgrading fields such as energy conservation and environmental protection, data center and intelligence. Zhong Zhengsheng, chief economist of Ping An Securities and director of the Research Institute, also believes that infrastructure investment will improve in 2022. Special bonds in 2022 will be better combined with major projects in the 14th five year plan.
Yu Yongding, President of Shanghai Pushan new financial development foundation and member of the School Department of the Chinese Academy of Social Sciences, said that at this stage, China still has room to further increase the expansibility of macroeconomic policies. By improving the growth rate of infrastructure investment through expansionary fiscal and monetary policies, China can curb the continuous downward trend of economic growth and stabilize the economic growth at about 6%.
Tian Guoqiang, President of the Institute of higher studies of Shanghai University of Finance and economics, said that the floods in some provinces of China in 2021 fully exposed that there are still serious deficiencies in China’s infrastructure, and with the aging population and increasing constraints on the ecological environment, infrastructure needs to be supplemented urgently. At the same time, China’s digital economy is in a booming tuyere, which also needs massive digital infrastructure investment as support.
Manufacturing investment is expected to continue its high growth. The central economic work conference in 2021 specially requires to enhance the core competitiveness of the manufacturing industry, start a number of industrial infrastructure reconstruction projects, and stimulate the emergence of a large number of “specialized and new” enterprises. Economists said that the manufacturing industry supported by policies in 2022 is expected to continue the investment resilience since 2021.
Wen bin, chief researcher of China China Minsheng Banking Corp.Ltd(600016) , said that China’s industrial structure continued to be optimized in 2021, and the growth rate of investment in high-tech industry and high-tech manufacturing industry was significantly faster than the overall growth rate of fixed asset investment. It is expected that manufacturing investment will continue to develop in 2022 with the continuous transformation and upgrading of the industry.
Zhao Wei, chief economist of Sinolink Securities Co.Ltd(600109) , said that manufacturing investment in 2022 will benefit from the continuation of the midstream boom and the repair of downstream scenes. On the one hand, with the support of industrial transformation, green development, domestic substitution and other factors, the midstream manufacturing industry is expected to continue to maintain a high boom; On the other hand, with the relief of cost pressure and demand repair, downstream consumer manufacturing related industries may also tend to repair.
Chen Weidong, President of the Bank Of China Limited(601988) Research Institute, said that although the epidemic had a serious impact on the real economy, it did not change the rapid growth trend of the high-tech industry. In 2022, the government will continue to increase support for scientific and technological innovation, and high-tech manufacturing industries such as medicine, aerospace, computer and office equipment are expected to continue to maintain rapid growth.
Consumption is expected to continue to pick up. He Haifeng, chief economist of Guotai Junan Securities Co.Ltd(601211) securities company, and Chen Hongbin, chief economist and assistant president of Sealand Securities Co.Ltd(000750) , both believe that the main growth power of China’s economy in 2022 is expected to come from the re recovery of consumption and service industry. With the increase of vaccination rate, the establishment of effective mass immunization, the improvement of epidemic prevention foundation and the mitigation of epidemic situation will drive the improvement of service industry and consumption.
Wen Bin said that in the first three quarters of 2021, the contribution rate of final consumption expenditure to China’s GDP growth reached 64.8%, higher than the contribution rate of consumption to the annual GDP growth in 2018 and 2019. Consumption has played an important basic role in economic growth. In 2022, China will continue to make greater efforts to mobilize the enthusiasm of market players, improve consumption capacity and willingness, and is expected to continue to release consumption demand.
Ju Houlin said that if the epidemic situation improves relatively in 2022, global economic exchanges are expected to recover gradually, which will drive additional economic growth. The global demand for tourism and business will gradually recover, and the demand for aviation, tourism, catering and accommodation will be repaired, which will benefit relevant industries.
Since 2021, the two-year average growth rate of online retail sales of physical goods has basically maintained at 13% ~ 15%, much higher than the two-year average growth rate of total retail sales of goods of about 3% ~ 4%. Chen Weidong predicts that the epidemic situation will be generally controllable in 2022, and consumption is expected to continue to rise to the normal level. He said that online consumption habits continued to strengthen, and new consumption is expected to maintain rapid growth. “In 2022, the new consumption of the younger generation, such as beauty economy, pet economy and entertainment economy, will continue to rise, which is expected to become a new bright spot in the consumption field.”
(Xinhua News Agency)
