Will China Meet 5.5% GDP Growth Target?


Amid strict restrictions to contain the pandemic, China’s retail sales logged a bigger-than-expected sharp fall in November and industrial production growth slowed markedly, reflecting disruptions to economic activity in many parts of the country and weak foreign demand, and raised concerns on the ability of Beijing to achieve its official growth target of around 5.5 percent for this year.

Retail sales plunged 5.9 percent from a year ago, much faster than the 0.5 percent decrease in October, the National Bureau of Statistics said. This was also bigger than economists’ forecast of -3.7 percent.

At the same time, industrial production registered a weaker growth of 2.2 percent in November. Output was forecast to climb 3.6 percent after a 5.0 percent gain.

In the January to November period, fixed asset investment advanced 5.3 percent after posting an annual increase of 5.8 percent in the January to October period.

The surveyed jobless rate rose to 5.7 percent in November from 5.5 percent in October.

Early evidence suggests that activity has remained subdued so far this month, despite the easing of COVID restrictions, Capital Economics’ economist Julian Evans-Pritchard said.

“While the move away from zero-COVID lays the groundwork for an eventual recovery in activity down the line, the transition period will prove quite disruptive,” the economist added.

The weaker performance of major economic indicators even at the end of the year underscores that Beijing will struggle to achieve its official growth target of around 5.5 percent. The economy had expanded only 3.9 percent in the third quarter.

The International Monetary Fund had projected China’s economy to grow 3.2 percent this year and 4.4 percent in 2023.

The People’s Bank of China on Thursday added CNY 650 billion into the financial system through one-year medium-term lending facility at 2.75 percent. The bank also injected CNY 2 billion via seven-day reverse repos at a rate of 2.00 percent.

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