China’s advisers recommend lowering of 2022 GDP target as headwinds mount – source

FILE PHOTO: Residential buildings under construction are seen near the central business district (CBD) in Beijing
FILE PHOTO: Residential buildings under construction and a power plant are seen near the central business district (CBD) in Beijing, China, January 15, 2021. REUTERS/Tingshu Wang/File Photo

December 2, 2021

By Kevin Yao

BEIJING (Reuters) – Chinese government advisers will recommend authorities set their 2022 economic growth target lower than the one set for 2021, giving policymakers more opportunity opportunities to promote structural reform amid an increasingly challenging outlook.

Investors are keeping a close eye on clues about next year’s reform agenda and policy when President Xi Jinping and other top leaders hold the annual Central Economic Work Conference in this month.

The three advisers told Reuters they had drawn up recommendations for annual economic growth targets ranging from a low of 5% to 5.5%, ahead of the caucus, down from the “above 6%” target. set for 2021.

“Ideally we should have growth of 5-5.5% or about 5.5% next year,” said one of the advisers.

“There is a need to maintain economic stability next year as we announce a new leadership and we need some countercyclical policies to deal with economic pressures.”

Another adviser, from a leading government think tank, suggested a target above 5% for next year.

Advisors make policy recommendations to the government but are not part of the final decision-making process. It is not known when the recommendations will be officially released. The adviser spoke on condition of anonymity.

A Reuters poll in October showed economists expected China’s growth to slow to 5.5% in 2022, but some analysts have since cut their forecasts. report on new risks such as a recession in the real estate sector. The new Omicron coronavirus variant is also thought to carry additional risks.

Separately, Liu Yuanchun, vice president of Renmin University, said last month China should set a growth target of around 5.5% next year to help create 12 million new urban jobs.

Traditionally, top leaders endorse the growth target at their December meeting, which is then publicly announced at the opening of the annual parliamentary meeting, usually held in March.

The world’s second-largest economy faces headwinds heading into 2022, as a property downturn and strict COVID-19 regulations have hampered consumption.

The economy, which enjoyed an impressive recovery from the pandemic last year, has lost momentum in recent months as it grapples with slowing manufacturing, massive property market debt and the COVID-19 outbreak- new 19.

Policymakers are likely to ramp up monetary and fiscal support next year to help the slowing economy, with a focus on fighting a property bubble this year.

“We expect the macroeconomic policy stance to ease in response to downward pressure on growth,” said Louis Kuijs at Oxford Economics.

“Policymakers are still interested in limiting financial risk and leverage, and have become more receptive to falling growth rates. However, in our view, Beijing still cares deeply about growth and wants to avoid a sharp deceleration.”

At last year’s economic work meeting, leaders vowed to use the recovery to focus on structural reform.

Setting a modest growth target of “above 6%” for 2021 in March – much lower than analysts’ forecasts of over 8% at the time – gave policymakers more the opportunity to make economic changes seem painful but necessary.


Xi’s reforms aim to reduce economic dependence on assets and liabilities, channel more resources into high-tech manufacturing and create a greener, more equitable economy.

But regulatory crackdowns on technology, education and entertainment have raised questions about the future of China’s private sector growth.

Last month, China’s ruling Communist Party passed a rare resolution elevating Mr. Xi’s status, solidifying power and the prospect of a third leadership term next year.

“As President Xi Jinping has secured an unprecedented third term, we expect his ambitious reforms to continue. His “New Development Concept” puts less emphasis on economic growth”, ANZ said in a note, forecasting a broader target range of 4.5–5.5%.

But some analysts believe the new pressures could limit the scope of reform in the short term.

Hu Yifan, regional investment director and chief China economist at UBS Global Wealth Management, said this week she expects the central bank to cut the amount of reserves banks are required to hold. kept before the Lunar New Year in early February.

After a wide-ranging reserve rate cut in July, the central bank has since defied market expectations for further policy easing.

According to analysts, China is likely to announce a new property tax pilot in several major cities next year, with potential candidates including Shenzhen, Hangzhou and Haikou.

Beijing hopes the property tax can help cool housing speculation, create new sources of government revenue and reduce China’s widening gap between rich and poor. (This story is quoted for source clarification in paragraph 25)

(Reporting by Kevin Yao; Editing by Sam Holmes) China’s advisers recommend lowering of 2022 GDP target as headwinds mount – source

Bobby Allyn

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