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China's economy is growing by 8.1 percent - but Omikron dampens confidence

2022-01-17T09:42:00.715Z

China's economy is growing by 8.1 percent - but Omikron dampens confidence Created: 01/17/2022 10:33 am By: Patricia Huber The economy in China grew in 2021 - but the forecast for 2022 is worse. © VCG/Imago Images Because China has come through the corona pandemic better than other countries so far, the economy has also benefited for a long time. But the spread of the Omicron variant triggers



China's economy is growing by 8.1 percent - but Omikron dampens confidence

Created: 01/17/2022 10:33 am

By: Patricia Huber

The economy in China grew in 2021 - but the forecast for 2022 is worse.

© VCG/Imago Images

Because China has come through the corona pandemic better than other countries so far, the economy has also benefited for a long time.

But the spread of the Omicron variant triggers new concerns.

Beijing – China’s economy grew significantly again in 2021* – but economists fear that the second largest economy could do less well this year.

As the Beijing Statistics Office announced on Monday, growth last year was a robust 8.1 percent.

However, momentum continued to weaken in the fourth quarter.

Compared to the previous year, the second largest economy grew by four percent between October and December.

China: Economic growth better than expected

The growth in gross domestic product was therefore slightly better than analysts had expected on average.

In the third quarter, growth was still 4.9 percent - after record growth of 18.3 percent in the first and 7.9 percent in the second quarter.

Industrial production also did better than expected in December, up 4.3 percent.

The strong plus in 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 testing, quarantines and entry restrictions, the most populous country got the virus under control faster than most other states.

Nevertheless, economists are now predicting a year with significantly less momentum.

The Chinese central bank reacted on Monday with the first notable interest rate cut since April 2020. It lowered the interest rate for one-year refinancing operations 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.

China: Evergrande crisis has negative effects

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 US 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.

The further course of the pandemic is likely to be decisive for economic development this year.

While countries around the world have started to live with the Corona virus *, Beijing is 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.

Corona: Omicron variant could have serious consequences for the economy

Experts fear that there could be serious consequences for China's economic development if there were lockdowns in many regions nationwide because of the Omicron variant, which would interrupt supply chains and paralyze factories. The US investment bank Goldman Sachs warned that a large omicron* outbreak could have serious consequences for the economy in China - and last week cut its forecast for China's growth to 4.3 percent in the current year. The World Bank also recently reduced its forecast from 5.3 to 5.1 percent.

Chinese economists from the Academy of Social Sciences (CASS) proposed a growth target of "more than five percent" for this year to the government in December. "Given the low base of the previous year and strong previous quarters, overall growth for 2021 was solid, as expected, at 8.1 percent," commented Jens Hildebrandt, Executive Board Member of the German Chamber of Commerce in China. For 2022, however, there is pressure on the Chinese leadership to further ease monetary policy, to reconsider the zero-Covid policy through the appearance of the Omicron variant and to strengthen consumption. “Because this one in particular has hardly gained momentum since last year. Rigorous measures after local outbreaks keep stalling consumption," said Hildebrandt.

(dpa) *Merkur.de is an offer from IPPEN.MEDIA.

Source: merkur

All news articles on 2022-01-17

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