China | New stimulus package not enough to ensure a 5.5% growth target in 2022

Chinese authorities not only prioritized economic growth in 2022 but also promulgated a series of stimulus measures in monetary and fiscal perspectives with actions.

Key points

• Key points:
• The recent Omicron outbreak in mainland China and the lockdown measures under “zero Covid” policy have significantly changed the previous soft-landing story for the Chinese economy.
• For 2022, Chinese authorities face the “Impossible Trinity” of policy setting among “zero tolerance” Covid policy, synchronized monetary policy and 5.5% growth target.
• On May 26, Premier Li Keqiang spoke at a State-Council teleconference with 100 thousand participants of policy-makers at different hierarchies on how to implement stimulus policies to stabilize growth.
• These stimulus policies include: Fiscal stimulus policy; Expansionary monetary policy; To stabilize supply chain and production; Supportive measures for consumption and housing market regulatory forbearance; to maintain energy security etc.
• The authorities are actively exploring the possibility of "zero Covid" and aggressive stimulus to achieve 5.5% growth target which we believe is challenging as the policy room of aggressive easing has been shrunk significantly amid a trending-up inflation and sharp RMB depreciation.

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