In the last three months of 2021, growth in the world’s second-largest economy slowed to 4% from a year earlier, according to government figures released Monday.
China’s economy was expected grew by 8.1 percent in 2021, but the government is under pressure to boost activity following a sharp drop in the second half as the ruling Communist Party pressed the country’s enormous real estate industry to decrease debt.
In the last three months of 2021, growth in the world’s second-largest economy slowed to 4% from a year earlier, according to government figures released Monday. That was down from 4.9 percent in the previous quarter and a staggering 18.3 percent in the first three months of 2021.
Due to recurrent coronavirus outbreaks and the debt crackdown, forecasters predict that weakness will endure this year. This might have worldwide ramifications, lowering Chinese demand for steel, consumer products, and other imported items.
China quickly recovered from the coronavirus outbreak, but activity slowed as Beijing tightened lending restrictions for the real estate business, resulting in a building slowdown that affects millions of people. This increased consumer apprehension about spending and financial market concerns about developer defaults.
In research, Oxford Economics’ Tommy Wu predicted that “downward pressure on growth will persist in 2022.” He predicted that the government will begin “policy support” to keep yearly growth above 5%.
Consumer expenditure, the economy’s main driver, fell to just 0.2 percent in December, down from 3.9 percent the month before. As developers canceled or postponed building projects, growth in investment in factories, real estate, and other fixed assets slowed to 1.7 percent, down from 4.9 percent for the full year.
As the economy deteriorated toward the end of 2021, some speculated that Beijing should decrease interest rates or invest money in infrastructure. The World Bank and private sector forecasters have lowered their growth forecasts for this year, but they are still higher than those of most other large economies.
During the pandemic, the Chinese central bank slashed its medium-term lending rate to commercial banks to its lowest level since 2020 on Monday.
Due to outbreaks of the Coronavirus, the Chinese government has imposed travel restrictions or outright bans in locations such as Tianjin, a port and manufacturing center near Beijing. This has harmed service industry spending. According to industry observers, if the outage lasts longer than a few weeks, it will have an influence on processor chip manufacture and other industries.
In a report, Capital Economics’ Julian Evans-Pritchard noted, “Economic momentum remains feeble despite periodic viral outbreaks and a failing property industry.”
The Chinese economy increased 1.4 percent in the final three months of 2021, compared to the previous quarter, according to the way other major economies are evaluated. This was up from 0.2 percent in the previous quarter.
Despite a global shortage of semiconductors needed to create smartphones and other items, and power restrictions implemented in major manufacturing locations, Chinese exports increased by 29.9% in 2021 over the previous year.
At a time when their international competitors are constrained by anti-virus measures, Chinese exporters have profited from reviving global consumer demand. However, economists predict that this year’s trade growth will be sluggish, and that export quantity would likely decline due to port congestion.
“With supply chains already stretched to capacity,” Evans-Pritchard added, “last year’s benefit from soaring exports can’t be duplicated.”
In November, auto sales decreased for the seventh month in a row, falling 9.1 percent from a year ago, indicating consumer apprehension about making large purchases.
Leaders in China are attempting to steer the economy toward more sustainable growth centered on local consumption rather than exports and investment, as well as to decrease financial risk.
Evergrande Group, one of the country’s largest developers, is struggling to avoid defaulting on $310 billion in debts owing to banks and bondholders.
This has stoked concerns about other projects, despite Chinese officials’ efforts to convince investors that any impact on financing markets will be limited. According to economists, an Evergrande default would have little impact on global markets.
In mid-September, factories in several provinces were required to close in order to fulfill official standards for energy consumption and intensity or the amount of energy utilized per unit of output.
After China’s interest rate cut and data release, Asian financial markets were neutral on Monday. The Shanghai Composite index rose 0.6 percent, while the Hang Seng index in Hong Kong fell 0.6 percent.