China: GDP growth target seen at 5.5% in 2022 – UOB

UOB Group’s Economist Ho Woei Chen, CFA, and Head of Research Suan Teck Kin, CFA, assess the recent announcement by the Chinese government regarding the GDP growth target for the current year.

Key Quotes

“The Chinese government has set a GDP growth target of “around 5.5%” for 2022 which is at the higher range of consensus forecasts. This highlights that policymakers think it is important to manage the growth moderation amidst a more challenging domestic and external environment.”

“With the larger GDP base, every 1% point increase in 2022 growth would be equivalent an increase of RMB1.14 tn, or the equivalent to 2% point increase in 2012 (when China's economy was only RMB53.86 tn in size). On a historical context, this means that a 5.5% growth target today is equivalent to a 10% GDP growth back in the 2010's and therefore is still a sizable amount.”

“Premier Li Keqiang announced plans to set up a financial stability fund and use market- and law based ways to reduce risks.”

“The Work Report has reinforced expectation that China’s monetary policy will continue to be eased. However, given the rising global inflation and interest rate environment, the risk is towards a smaller magnitude of easing as credit growth starts to rebound. For now, we still maintain our forecast for the benchmark 1Y LPR to fall by another 15 bps to 3.55% by the end of 2Q22. There is also possibility for a further cut to the reserve requirement ratio (RRR) to help lower the funding costs for banks.”