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China: Economy grows by 8.1 percent - central bank lowers interest rate anyway

2022-01-17T09:55:18.155Z

The Chinese economy continued to grow last year, but weaker than before. Now the Omicron variant is also threatening the country, and the central bank is reacting with the sharpest interest rate cut in almost two years.



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Bullet trains in Nanjing: China's economic recovery has slowed

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VCG/VCG/Getty Images

The economy in China has grown significantly in the past year.

As reported by the statistical office, growth last year was a robust 8.1 percent.

In the last quarter of 2021, the economy grew faster than expected, with gross domestic product (GDP) increasing by 4.0 percent compared to the same period last year.

Nevertheless, economists fear that this year could not be as good for the second largest economy in the world.

Because the momentum is weakening - compared to the record growth of 18.3 percent in the first quarter and 7.9 percent in the second quarter, the growth rate is no longer as lush.

The Chinese central bank reacted accordingly with the first notable interest rate cut since April 2020. It lowered the interest rate for one-year refinancing transactions with banks by 0.1 percentage points to 2.85 percent.

At the same time, the interest rate for one-week securities transactions was reduced by the same amount to 2.1 percent.

In addition, the central bank injected additional liquidity into the financial system.

Exports support China's economy

Most recently, it was mainly the strong exports that supported China's growth. But foreign trade alone cannot compensate for other problems in the long run: The real estate market has cooled down. He is burdened by uncertainties such as the crisis surrounding the real estate group Evergrande, which has debts of more than 300 billion dollars. The government continues to work to reduce the high levels of corporate debt. Increased raw material costs and energy shortages have also recently had a negative impact on the economy.

In addition, the strong growth over the year can be explained above all by the low basis for comparison due to the pandemic in the previous year. With a zero-Covid strategy, mass tests, quarantines and entry restrictions, the world's most populous country got the virus under control faster than most other countries.

The further course of the pandemic is likely to be decisive for economic development this year. The government in Beijing is relying more than ever on isolation. Nationwide, only around 150 cases were reported daily - in a country with 1.4 billion people. But aside from the lack of independent reporting in China, the government is concerned about the spread of the highly contagious omicron variant. According to official information, the variant was first discovered in China last week.

Experts fear that there could be serious consequences for China's economic development if there were lockdowns in many regions across the country, which would disrupt supply chains and paralyze factories.

The US investment bank Goldman Sachs warned that a major outbreak could have serious consequences for the economy in China - and last week cut its forecast for Chinese growth to 4.3 percent in the current year.

The World Bank also recently reduced its forecast from 5.3 to 5.1 percent.

apr/dpa

Source: spiegel

All business articles on 2022-01-17

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