Economic Stability to Be Focus in 2022

Policy fine-tuning likely in energy sector to maintain production, growth

Economic stability will be the top priority of China’s policymakers next year, as they are expected to roll out supportive measures ahead of schedule to shore up growth against strong headwinds and will likely set 5 percent as the bottom line for GDP growth for 2022, experts said on Sunday.

Policymakers will intensify fiscal spending to boost domestic demand and increase infrastructure investment and are likely to fine-tune regulatory measures in the energy sector to stabilize production and growth, they said.

China’s top leadership acknowledged that the country is facing threefold pressure from contraction of demand, supply shocks and weaker expectations, and it pledged to safeguard economic stability amid rising domestic and external challenges at the tone-setting annual Central Economic Work Conference, which concluded on Friday.

Top policymakers at the meeting decided that supportive policies should be implemented ahead of schedule, and all regions and departments should actively roll out policies conducive to economic stability, according to a statement released after the meeting.

Experts said that the emphasis on economic stability signals that China will pursue a more pro-growth policy to avoid deep economic slowdown, as the world’s second-largest economy is likely to face strong downward pressure in the first half of next year before rebounding in the second half.

Most economists agreed that setting a reasonable growth target for next year is important for the government to better anchor the weakened market expectations. Policy support needs to be further intensified, because the Chinese economy may continue to be threatened by weaker growth of consumption and investment, disruptions of the supply chain, resurgence of the COVID-19 pandemic and the negative spillover effect of developed economies exiting their ultra-loose policies, they said.

Zhang Lianqi, a member of the Standing Committee of the 13th National Committee of the Chinese People’s Political Consultative Conference, China’s top political advisory body, said China may set next year’s GDP growth target at around 5.5 percent year-on-year, with 5 percent growth expected to be the bottom line.

“Stability will be the top focus of economic policies in 2022,” Zhang said.

The key economic meeting also stressed the importance of strengthening policy coordination, sticking with a systemic approach and improving policy effectiveness, which were seen as signs that policymakers will work to avoid any negative effect of its regulatory policies that could weigh on economic growth, experts said.

Han Wenxiu, a senior official with the Central Committee for Financial and Economic Affairs, said on Saturday that the government should be cautious about unveiling policies that could trigger economic contraction. The government should also avoid launching policies that are reasonable separately but could have negative effects as a whole, he added.

Wu Chaoming, chief economist at Chasing Securities, said that the country is expected to fine-tune regulations in areas such as the property market and capital expansion in certain sectors to foster well-regulated and healthy development, instead of launching stern regulatory moves that could trigger contractions of economic activities.

It is necessary to prevent industrial regulations from diluting macro policy support and aggravating economic downside risks, Wu said.

Looking forward, a more proactive fiscal policy can be expected as the government will launch additional tax and fee cuts to alleviate financial burdens on smaller enterprises and ensure stable employment. Public spending and the issuance of local government bonds will also be accelerated to boost infrastructure investment, said Wen Bin, chief researcher at China Minsheng Bank.

China’s monetary policy will maintain a flexible stance to ensure ample liquidity, and additional reduction of banks’ reserve requirement ratio and interest rate cuts remain viable options of the Chinese central bank if the economy further decelerates in the first half of next year, Wen said.