Less growth expected: gloomy prospects for China’s economy

Status: 07.12.2021 9.45 a.m.

The consequences of the corona pandemic, scarcity of raw materials, but also uncertainties in the real estate sector are slowing the economy in China. The government apparently wants to issue a lower growth target.

The years of stormy economic growth in China may be over. The Asian country, the engine of growth for the global economy alongside the USA, is likely to grow much more slowly in 2022 than in previous years. A new growth target for the economic giant is apparently already being prepared. During the Communist Party’s annual political deliberations on economic policy for the coming year, a leading state think tank proposed setting a lower growth target of “more than five percent”.

“It would allow all parties involved to focus on promoting reform and innovation in order to achieve high-quality growth,” state media quoted Li Xuesong, an economist from the Academy of Social Sciences (CASS), quoted as saying. For the 2022 economic plan, the experts also recommend an inflation target of around three percent again, a budget deficit of around three percent and the creation of eleven million jobs in cities.

Just “economic fluctuations”?

China’s growth target this year is still “more than six percent”. At a meeting with the heads of major business organizations yesterday, Prime Minister Li Keqiang was confident that this goal can be achieved. “The Chinese economy is resilient and has potential,” Li said at the meeting on Monday evening. “China is able to handle short-term economic fluctuations.”

However, this cannot hide the weaker long-term growth prospects in the People’s Republic. The International Monetary Fund (IMF) has expressed concern about the slowdown in economic growth in China. “China has achieved a really remarkable recovery, but its growth momentum has slowed noticeably,” said IMF chief Kristalina Georgieva after a virtual meeting with Prime Minister Li.

IMF has lowered forecasts

Since China is so important to global growth, “firm measures to support high-quality growth will not only help China, but the whole world,” said the head of the monetary fund. In October, the IMF lowered its forecasts for Chinese growth and forecast an increase of eight percent this year and 5.6 percent next year.

Germany’s exports to China are barely increasing

The current foreign trade data for China still show a rather positive picture of the economy in the world’s second largest economy. Imports in particular significantly exceeded expectations in November. They rose by 31.7 percent – after plus 20.6 percent in the previous month, as the customs authorities reported in Beijing on Tuesday. However, exports only grew by 22 percent, after the increase in October had been 27.1 percent.

For German exporters, however, little remained of the increasing imports to China. They only increased by 3.3 percent. In contrast, Chinese exports to Germany rose sharply by 28.9 percent. It is similar with the European Union: While Chinese exports to the EU climbed by 33.5 percent, imports from the EU remained weak with a small plus of 4.2 percent.


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