China: Putting the tiger on a stronger footing in 2022

The Chinese economy is experiencing a difficult start to 2022, driven by renewed Covid-19 outbreaks. Even if the sanitary context eases, private consumption is likely to remain below the pre-pandemic trend level in 2022 (-2.8% or -USD170bn).

Going forward, the flailing domestic leg should be supported by further policy rate cuts, public investment in infrastructure (c.3% of 2022E GDP) and temporarily laxer regulation. The external leg should remain robust, in the context of modest depreciation of the CNY, regional trade integration and US-China trade tensions being on hold.

All this should bring the Chinese economy to a stronger footing in H2 2022. Beyond that, achieving “common prosperity” could imply a volatile medium-term growth pattern, depending on how policies are implemented and communicated.

Contact

Ludovic Subran
Allianz SE
Francoise Huang
Allianz Trade