China Economic Outlook. First Quarter 2022

Growth has continued its downward trend in Q4 2021. China’s unsynchronized business cycle and inflation cycle call for an unsynchronized policy cycle.

Key points

• Key points:
• A number of growth headwinds weigh on the economic outlook, including the “zero tolerance” strategy which dragged on consumption recovery, real estate sector crackdown, exports normalisation and continuing regulatory storms.
• Economic structure remains unbalanced as the economy depends too much on exports while domestic consumption and investment keep lacklustre, in addition, the demand side continues to lag behind the supply side.
• By contrast with high inflation in the US and the EU, China’s CPI is still at bay as decelerating pork prices dominate the CPI and offset the pass-through effect from high PPI. PPI started to moderate recently.
• By sharp contrast with the FED speed-up tightening measures, China’s monetary and fiscal policy will be more easing in 2022 to deal with the economic growth slowdown.
• The new growth model includes three “pillars”: common prosperity, technology self-sufficiency and green economy. The new growth model will have profound impact on global economy.

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