GlobalData revises China’s economic growth rate down to 4/5 in 2022

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GlobalData, a data and analytics firm, has revised the GDP growth rate forecast for China in 2022 from 5% in February to 4.5% in April, amid rising Covid-19 cases. 19, weak housing market and rising oil prices due to the Russian-Ukrainian conflict.

According to the National Bureau of Statistics, retail sales increased by 6.7% (year-on-year) and the high-tech manufacturing sector increased by 14.4% (year-on-year) in the first two months of 2022 compared to the previous year. Additionally, consumer demand has increased despite recent geopolitical developments. The government has also increased spending on infrastructure projects, particularly in the power and semiconductor sectors.

However, a strong rebound in economic growth may not be sustained in the coming months due to major headwinds. The continuing outbreak of new variants of Covid-19 has forced China to institute strict restrictions resulting in the closure of major manufacturing units and ports. The government’s adoption of an aggressive zero Covid policy is likely to have a prolonged impact on global supply chains, hampering manufacturing output, he said.

Gargi Rao, economic research analyst at GlobalData, said: “China is Ukraine’s main export destination, the conflict is likely to cast a shadow over Chinese companies operating in Ukraine. Due to its strategic location, Ukraine is a major hub for China’s Belt and Road Initiative. In addition, a free trade agreement with Ukraine will allow China to access European markets. However, with the conflict, the future of all these investments and projects is in jeopardy.”

Soaring coal and crude oil prices and input costs that squeeze overall corporate profits have put inflationary pressures on the economy. In the case of a stable scenario, GlobalData projects that a 10% increase in annual oil prices will add 0.2 to 0.3 percentage points to inflation.

Weak real estate and consumer demand will likely keep inflation rates manageable at 2.5%. However, if talks between Russia and Ukraine fail, the widespread supply crisis and rising input costs are expected to push inflation rates up to 3.5% for 2022, he said. .

Rao said: “According to GlobalData, hiring activity has declined since early March 2022 amid rapidly increasing COVID-19 cases. China’s biggest tech companies are carrying out large-scale layoffs this year as they face an economic slowdown and regulatory pressure from Beijing. Additionally, job prospects for college graduates have declined amid bleak economic prospects.

Rao added that industrial production activity resumed in the first two months of 2022. However, power outages and the lockdown of manufacturing centers amid the peak of COVID-19 will impact production. Supply constraints remained the main downside risk for investors and manufacturing giants.

Equity markets have been affected since late February due to pressures on multiple fronts, including the COVID-19 shutdowns and inflationary pressures built up due to the invasion of Ukraine. According to GlobalData, the Shanghai SE Composite index fell 5.5% (year-on-year) in March 2022.

Rao said: “The lockdowns have caused manufacturing units to shut down and consumer demand has plummeted. In addition, slowing European markets may also hamper Chinese export growth amid wartime uncertainty. restoring investor confidence and stimulating consumer demand.”


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