![]() ![]() The Fed is expected to continue interest rate hikes this year. The Chinese yuan (CNY) is suffering depreciation pressure from the widening interest rate differential with the US. These investments are mostly funded by local government special bonds, local government financial vehicles, central government funds, and loans from policy banks in China. We expect an infrastructure investment equivalent to around 5% of GDP for 2022. With the consumer market undergoing a recovery, infrastructure investments are a key support for the economy after the contraction of most economic activities in 2Q22. Infrastructure investment: a form of fiscal stimulus Foreign exporters can also benefit from the recovery of the Chinese consumer market. It is expected that retail sales will turn from negative year-on-year growth in 2Q22 to positive year-on-year growth in 2H22. Structurally, it means the Chinese economy has transformed into a more diversified economy, with a big consumer market and more capital-intensive manufacturing activities. Consumer demand should return as Covid rules are relaxed. However, the risk of lockdowns still exists, even though the probability is lower than in early June as the government has adopted weekly covid tests in many cities.ĭuring the worst period of lockdowns, the (negative) contribution of the consumer market to the economy was obvious. The government announced the decision to shorten the isolation period for positive Covid cases and adjust the frequency of Covid tests according to the risk of infection, which is a more flexible policy than back in early June 2022. The short-term outlook is based on the possibility of more Covid-19 lockdowns, the increasing tension between China and the US and its allies regarding world politics, which could turn out to be international trade issues, and the Fed’s rate hikes.Ĭhina is becoming more willing to accept single-digit Covid cases and is reopening schools and restaurants. We expect a slower GDP growth rate in 2022 due to very tight Covid measures in the second quarter of this year. If the production cuts persist for the rest of the year,Īnalysts see a one percentage-point hit to GDP growth in the fourth quarter.Domestic economy impacted by Covid measures and infrastructure investments from the governmentĬhina's nominal GDP reached $17.5 trillion in 2021, a growth rate of 8.1%. (3908.HK) said the shortages would lower the country’s growth rate by 0.1 to 0.15 percentage points in the third and fourth quarters. “Beijing’s unprecedented resolve in enforcing energy consumption limits could result in long-term benefits, but the short-term economic costs are substantial,” he said in a note. Read: Energy Shortages Are Becoming a Problem. And the bank’s chief China economist, Ting Lu, said that could be lowered further. Nomura cut its full-year GDP growth forecast to 7.7% from 8.2% Friday. The energy crisis is a “new, but tightening” constraint on growth, they said, adding to downward pressures on property sales and construction, Covid restrictions to counter local outbreaks, and Beijing’s wide-ranging regulatory crackdown. (3333.HK) stresses and the government’s approach to managing it. ![]() ![]() They noted that “considerable uncertainty” remains heading into the fourth quarter, most notably upside and downside risks to the Read: A Worsening Energy Crisis Is the Next Big Risk for China “Recent sharp cuts to production in a range of high-energy-intensity industries add to the already significant downside pressures in the growth outlook,” the bank’s analysts, led by Hui Shan, said in a note. The Wall Street bank lowered its full-year 2021 GDP growth forecast to 7.8% from a previous forecast of 8.2%, describing China’s energy constraints as “yet another growth shock.” ![]() Year-over-year growth forecasts were cut from 5.1% to 4.8% for the third quarter and 4.1% to 3.2% for the fourth. (GS) lowered its third-quarter GDP growth forecast to 0% quarter-over-quarter, from a previous forecast of 1.3%, while cutting its fourth-quarter forecast to 6% from 8.5%. ![]()
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