Four reasons why the Chinese economy could overcome gloomy predictions and see exponential growth in 2022

Estimates on China’s economic growth have been too pessimistic, according to Morgan Stanley analysts

editor: REMIX NEWS
author: Origo
People walk by a map showing Evergrande development projects in China at an Evergrande new housing development in Beijing on Sept. 22, 2021. China’s central bank expanded the supply of money for lending Monday, Dec. 6, 2021, as Beijing tried to reassure its public and investors the economy can be protected if a troubled real estate developer’s $310 billion mountain of debt collapses. (AP Photo/Andy Wong)

The Chinese economy could grow significantly faster this year than initial predictions estimate, according to analysts at investment bank Morgan Stanley.

After several months of sluggish growth, staff at the U.S financial services giant are predicting a significant economic upturn for the world’s second-largest economy with growth of up to 5.5 percent, citing four primary reasons why the Chinese economy may exceed expectations.

Pause on tightening

The Chinese government has already slowed its central debt relief efforts, and some easing has been felt in both the fiscal and monetary policies in the last weeks of 2021. For example, banks’ reserve requirements have been reduced, freeing up liquidity for policymakers, which could boost lending. This could contribute to stronger-than-expected economic activity.

Real estate market relief

After severe debt risks emerged in China’s real estate sector in the second half of last year, Beijing has decided to tighten corporate borrowing opportunities.

While the decision has brought a significant slowdown in real estate development and sales activity, Morgan Stanley analysts believe that decision-making interventions and debt restructuring together could ease pressure on players such as Evergrande, the world’s most indebted real estate developer. Under the optimistic scenario, the Chinese real estate market could stabilize this year, supporting economic growth.

Sustainable energy targets

As China began to vigorously curb its carbon emissions last year, there were ongoing energy supply difficulties as the country is so heavily reliant on industrial production. U.S. analysts said the targets set by Beijing were “too aggressive”, holding back GDP growth.

However, soon after the energy shortages occurred, particularly in the coal industry, the government was able to act quickly and efficiently, Morgan Stanley analysts claim. They believe that the pressure on the Chinese energy sector may ease this year, which may also reduce the forces currently holding back economic growth.

Sustained strong exports

Finally, the bank stresses that China’s so-called “zero Covid” epidemic handling has prevented significant disruptions in the manufacturing industry. As a result, Chinese exports have even been able to increase their global share in recent years. China’s share of global exports, however, could shrink somewhat as global supply chains recover, but strong Chinese exports in 2022 may still support economic growth.

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