Chinese Economy in 2022: How to Achieve a Reasonable Growth Target

Abstract:

The Chinese economy, yet to fully recover from the pandemic, recorded a 2-year average growth lower than its potential rate during 2020-21. To achieve multiple goals such as promoting social wellbeing, boosting business performance and upgrading the industrial structure, China should strive for a GDP growth at or above 5.5% in 2022.

To this end, China needs to adopt more active policy, in order to counter severe demand contraction ahead since the service sector is still in the doldrums, credit expansion is crippled by recent developments in the housing market, infrastructure investment has slowed due to tightened supervision of local government debt, and reduced contribution to GDP by export. Specifically, China should fully leverage monetary policy to boost credit expansion, introduce more proactive fiscal policy to stimulate demand, and press ahead with reforms in key areas to improve asset allocation efficiency.