How to Ensure GDP growth in 2022?

2022-06-12 0 By

At the end of February, the National Bureau of Statistics (NBS) released a statistical communique that China’s GDP in 2021 will exceed 114 trillion yuan, up 8.1% year on year, far exceeding the 6% target set in last year’s government work report.However, taking into account the impact of the epidemic in 2020, GDP growth averaged 5.1% in the past two years.At the just-concluded two sessions, Premier Li Keqiang said in his government work report that China’s GDP growth target for this year is around 5.5 percent, which is on the high side of market forecasts and even considered ambitious.The year 2021 is the first year of the 14th Five-Year Plan. We have accumulated new experience in maintaining fast economic growth in response to complex situations.During the year, macroeconomic policies continued to deleverage, monetary controls were kept tight, aggregate financing grew by only 10.3%, and inflation was less than 1%, in sharp contrast to the high inflation prevalent in western developed countries.Fiscal policy was relatively conservative, and fixed asset investment grew by a modest 4.9 percent for the year, but infrastructure investment grew by only 0.4 percent, with investment not being the main driver of growth.In one year, China’s total import and export volume crossed the threshold of US $5 trillion and US $6 trillion respectively. China’s manufacturing sector’s share in the global market has further increased to nearly 30%.Despite the tense situation of the epidemic, the 2021 major targets and tasks have been well accomplished.Ii. Is GDP growth guaranteed?After the global financial crisis in 2008, China proposed a target of “4 trillion yuan” and (8%), which was impressive.In the past two years, China’s GDP grew by an average of 5.1%, and this year’s target is 5.5%.In a flash, it has been more than 10 years since 2009.Today’s GDP is no longer the 32 trillion yuan era of 2008.Statistics show that the GDP of 2021 will be 3.6 times and 3.8 times higher than that of 2008 at current and constant prices.The “five” policy is more than three times the “eight” policy.Calculated at constant prices, the 5.5% increase in the five-year plan in 2022 is 11 billion yuan ×5.5%=6.05 trillion yuan, exceeding 6 trillion yuan.In 2009, the “eight protection” increase was 26 trillion ×8%=2.08 trillion, more than 2 trillion.It can be seen that the increment of “guaranteeing five” is three times that of “guaranteeing eight”.// Figure: In the next 15 years, China’s average GDP growth rate needs to be kept at around 5%, as per capita GDP is set in the 14th Five-Year Plan to reach the level of moderately developed countries by 2035.According to academic standards, the per capita GDP of moderately developed countries should be at least $20,000.According to our model, China’s per capita GDP is expected to reach about $20,000 in 2035, comparable to the current level of the world’s moderately developed countries.However, China’s per capita GDP in 2020 was just over 10,000 US dollars. In 2021, the RMB will appreciate by 6.9% against the US dollar compared with 2020, and the per capita GDP will be 12,551 US dollars, which needs to be doubled from 20,000 US dollars.In addition, the World Bank announced the global per capita GDP of $10,918 in 2020, which is similar to That of China.Considering that the threshold for middle-income countries will rise in 2045, it is necessary for China to maintain a GDP growth rate of around 5% to achieve the goal of achieving the level of middle-income developed countries by 2035.If China’s GDP can keep growing at around 5% for a longer time, it is predicted that China will enter the threshold of developed countries around 2050.Last year, Korea was designated as a developed country. The per capita GDP threshold for a developed country is about $30,000.According to our model, China’s economic growth rate will continue to be around 5%, and its per capita GDP will reach over $30,000 by 2050, approaching the threshold of developed countries.Although the annual economic growth exceeded 8% again in 2021, in fact, looking back on China’s economic growth since the beginning of this century (as shown in the figure below), the economic growth center is gradually declining.According to the data, in the five years of new normal before the epidemic in 2020, GDP growth rate was above 6%, although it was slowly declining.In the third and fourth quarters of 2021, the GDP growth rate has been cut by 5%.It only took two years for China to drop from 6% to less than 5%. This downward speed is too fast and too rapid, which is not good for China to maintain a healthy potential economic growth rate and will do great harm to the medium – and long-term economic growth.Therefore, the target of 5.5 percent growth in 2022 is aimed at appropriately boosting the driving forces of the economy and “putting back” the economic growth chart to a normal range.This shows that there is a very profound reason why China has set a target for 5.5% GDP growth this year and set aside 0.5 percentage points higher than the target.// Figure: China’s quarterly GDP growth trend 5.In the third and fourth quarters of last year, the quarterly GDP growth rate was lower than 5%. As stated in the Central Economic Work Conference in December 2021, “China’s economic development is facing triple pressures of demand contraction, supply shock and weakening expectations”, and the capital market has taken the lead in the repeated downward trend.In this situation, how to “protect five”?First, a growth target of 5.5%, not 5%, signals government initiative.As can be seen from this year’s government work report, economic growth is the main tone, and the policy focus has shifted from regulatory tightening and deleveraging to stable growth.Second, we increased government spending and tax and tax rebates to support the development of enterprises.Last year, government revenue exceeded 20 trillion yuan, an increase of 10.7%, while government expenditure increased by only 0.3%.According to the government work report, this year’s additional spending will be no less than 2 trillion yuan. The increase will be mainly used to cut taxes and fees, especially tax rebates, which will amount to 2.5 trillion yuan.Third, we need to increase the financial resources of local governments to ensure investment in infrastructure.As noted in the government work report, transfer payments from the central government to local governments grew by 18 percent this year, the slowest growth in years, to a total of 9.8 trillion yuan.One of the main reasons infrastructure investment grew less than 1% last year was a lack of investment by local governments, which will break this year.Fourth, compared with last year’s loose monetary policy.This year’s government work report, however, only calls for “strengthening prudent monetary policy implementation”.But from “expand the scale of new loans”, “reduce the real loan interest rate” requirements, real estate loans to ease and the voice of the central bank at the beginning of the year, this year’s monetary policy than last year’s signal has been obvious.Fifth, export remains the main driving force for economic growth.The high growth base of import and export in 2021, coupled with the impending end of the global epidemic and the gradual recovery of exports from other countries, many people are worried that China’s foreign trade may be sluggish this year.However, we believe that In the post-PANDEMIC era, China, as the world’s leading exporter, can still take the top spot with its strong competitiveness.The recovery of new demand in global production and living will also boost export and economic growth of other developing countries.Sixth, we need to solve several major problems.One is to reduce supply shocks.As guangdong, Shanghai and Shandong are dealing with a new round of COVID-19, new measures are needed to deal with the impact of the epidemic.Overall planning to avoid the impact of energy supply and energy consumption assessment on the production end.Last year’s assessment of energy consumption and energy shortages had a big impact on the production side. This year, we need to strike a balance between green development and economic growth.Actively respond to the impact of the Russia-Ukraine war on global resource prices, increase the control of domestic resource prices.Second, we will boost consumer confidence.Under the background of China’s low per capita income, consumption is still difficult to become the main driving force of economic growth, but necessary consumption stimulus policies will still be effective.In foreign trade growth is difficult to continue the same high growth last year, enterprises need more domestic demand growth.In light of the epidemic situation across the country, it is imperative to promptly introduce consumption stimulus policies and boost consumer confidence in multiple ways.Third, we corrected policies for macro-control of the real estate market.In the past 15 years, real estate regulation has achieved obvious results. When the economic growth rate is low, the external environment turbulence caused by the Russia-Ukraine war and the global economic growth rate is declining, the problem of tight real estate credit should be corrected first, the excessive purchase restriction policy should be cancelled, and the transaction cost in the real estate market should be reduced.Fourth, we will encourage investment in the digital economy, especially in the Internet.Investment in software and information technology grew at the slowest rate in nearly a decade last year.At present, in light of the new international economic and geographical situation, we need to formulate policies to encourage the integrated development of the digital economy with manufacturing and services, encourage investment in digital infrastructure, new technologies and new projects, and invigorate the digital economy.Fifth, we will strengthen capital market development.The establishment of the Beijing Stock Exchange last year further improved the domestic capital market.It is necessary to step up capital market reforms this year.On the one hand, we will severely crack down on illegal activities in the capital market, support high-quality enterprises to grow bigger and stronger, narrow the gap with the world’s top 500 listed companies, and expand the role of the capital market in driving economic growth.On the other hand, we will strengthen investor protection, introduce policies to encourage medium – and long-term capital to enter the market, support institutional investors to grow bigger and stronger, give full play to the role of the capital market as a channel for increasing personal property income and sharing the fruits of economic growth, and support economic growth from the consumption side.