China considering lowering 2022 growth target to 5.5%-6%
President Xi aims to spur demand, increase jobs before CCP congress in the fall
BEIJING -- President Xi Jinping's government is considering lowering China's 2022 economic growth target to 5.5% to 6%, from 2021's goal of 6% or more, government sources told Nikkei Asia.
As worries about stagnation grow, the administration plans to shore up economic activity through new tax cuts and monetary relaxation before the start of the Chinese Communist Party's national congress in the autumn of 2022. The meeting is held every five years.
The government's growth target for the whole of 2022 will be announced in its activity report to the National People's Congress that will convene in March.
The Chinese economy is expected to grow at around 8% in 2021, exceeding Beijing's own target of "6% or more." This is primarily because of the 12.7% expansion achieved in the January-June period due to the low base a year ago when COVID-19 first hit. But China's growth slowed in the second half of 2021 and some economists expect the figure to have fallen below 4% in the October-December quarter. The 2021 full-year growth figure will be released in mid-January.
Analysts forecast that the Chinese economy will grow 5% to 5.5% in 2022 in the absence of a sharp this year. The Chinese Academy of Social Sciences and the People's Bank of China estimate China's potential growth rate, which represents the raw strength of the economy, at about 5.5% for 2022.
But government officials told Nikkei that "the growth target [of 2022] will be more optimistic than [such] outlooks."
The government has begun working out a somewhat bullish growth target because the CCP's national congress will be held in the autumn of 2022. Xi is expected to seek his third consecutive term in office as general secretary of the party at the congress. He will need to ensure a considerably high growth rate that will generate jobs to secure his position.
The Central Economic Work Conference, held recently to map out economic policy priorities for 2022, confirmed the need to sharply boost domestic demand. Although details have yet to be revealed, the government will ease the burden of costs on businesses, through new tax cuts and the reduction of social insurance premiums, to help them improve earnings battered by higher materials prices and other problems. The group also expects an increase in private-sector investment.
The PBOC is also further easing its grip on credit. The Chinese central bank cut the prime loan rate -- an effective interest rate -- on Dec. 20. Five days before the rate cut, the central bank reduced banks' reserve requirement ratio to inject money into the economy.
A government official told Nikkei that the central bank is "highly likely to carry out additional rate cuts in 2022 to stimulate the economy while closely watching price trends."
In addition, the issuance of bonds to finance infrastructure projects has been frontloaded. The Ministry of Finance has allowed local governments to issue a total of 1.46 trillion yuan ($229.17 billion) in special bonds to finance infrastructure projects. The sum is included in the total issuance for 2022.
The partial frontloading is aimed at launching public works projects to create new demand through the issuance of bonds by March 2022.
The government has also revised its toughened property market regulations as part of its plans to stimulate economic activity. The market was held back by regulations introduced to contain a property bubble, which dragged on China's economic growth in the second half of 2021.
The Xi administration will promote the development of homes for low- and middle-income families in urban areas while continuing to rein in speculative property investment that could increase financial risks. It will seek to shore up the economy by creating a new growth model for the real estate market.
The government is also stepping up efforts to prevent an omicron outbreak before the start of the Winter Olympics in Beijing in February. Under the central government's "zero COVID" policy to prevent new infections, many local authorities are urging citizens to refrain from returning home or making trips during the 2022 New Year and Lunar New Year holidays.
This could have a big impact on economic growth, as seen last year. China's seasonally adjusted real-term gross domestic product grew a meager 0.2% in the January-March 2021 period from the preceding quarter as people cut domestic travel and social gatherings.
The government is expected to finalize a growth target for 2022 after closely analyzing year-end and new-year economic trends.