China Economic Outlook. Fourth Quarter 2021

Summary

Growth has slowed down in Q3 amid a number of headwinds, including regulatory storms, default risk of real estate giant, the electricity crunch and the authorities’ new campaign of “common prosperity” and social equality.

Key points

• Key points:
• Economic structure remains unbalanced as the economy depends too much on exports while domestic consumption and investment keep lackluster.
• Compared with high inflation pressure in US and the EU, China’s CPI is still at bay, with a weak pass-through effect from PPI to CPI.
• Diverging with the QE Tapering in the advanced economies, China’s monetary policy will be more easing to deal with growth slowdown.
• Three main policy directions in the medium to long term: carbon neutrality, regulation tightening on monopolistic and disorderly capital expansion, "common prosperity" and social equality.
• We lower our 2021 GDP prediction to 8% y/y from 8.2% previously; we also lower our 2022 GDP forecast from 5.5% to 5.2%.

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