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China can achieve economic growth of around 5.5% in 2022 -cabinet adviser

Randy Mancini 2 Jan 21
FILE PHOTO: People walk past an office and commercial complex in Beijing's Central Business District (CBD)
FILE PHOTO: People walk past an office and commercial complex in Beijing's Central Business District (CBD), China March 15, 2021. REUTERS/Tingshu Wang

January 21, 2022

By Kevin Yao

BEIJING (Reuters) -China will be able to achieve economic growth of around 5.5% in 2022, Zhu Guangyao, an adviser to China’s cabinet, said on Friday, in a rosier prediction than market expectations.

The Chinese economy, which cooled over the course of last year, faces multiple headwinds in 2022, including persistent property weakness and a fresh challenge from the local spread of the highly contagious Omicron variant of the coronavirus.

The comments by Zhu, a former vice finance minister, are more optimistic than those from private economists.

A Reuters poll of analysts published on Jan. 13 forecast China’s economy would grow 5.2% in 2022.

The government will unveil a growth target for 2022 at the opening of the annual parliament meeting in early March.

“I’m confident that China’s economic growth will be around 5.5% in 2022,” Zhu told a briefing, adding that the potential economic growth rate was estimated at 5-6%.

Li Yang, former vice president of the Chinese Academy of Social Sciences, a top government think tank, said China has policy space to support the economy.

China was restrained on monetary policy and fiscal policy in 2021, leaving some space for this year, Li said.

China’s central bank cut its benchmark lending rates on Thursday to prop up the slowing economy, after data earlier in the week pointed to a darkening outlook for the troubled property sector.

China’s cabinet has pledged to speed up issuance of local government special bonds to help boost investment, while the finance ministry has issued 1.46 trillion yuan ($230.26 billion)in the 2022 advance quota for local special bonds.

Expected interest rate hikes by the U.S. Federal Reserve could have a very big market impact, Zhu said, adding that the United States should strengthen its policy coordination with developing countries.

“We hope the United States could change the idea that ‘the dollar is our currency, but your problem’, and truly strengthen its policy coordination with other countries, especially developing countries and emerging market countries,” Zhu said.

Li said the expected Fed tightening could trigger capital outflows from developing countries, with some countries already feeling the pressure.

The impact on China’s economy could be contained by its controls on capital flows and a managed float yuan exchange rate, Li added.

($1 = 6.3406 Chinese yuan renminbi)

(Reporting by Kevin Yao; Editing by Raissa Kasolowsky)