VIEW: ABN AMRO: Growth Risks To Remain In Year Of The Tiger

ABN AMRO note that “strong full-year annual growth masks exceptionally weak, pandemic-driven Q/Q growth this year. We have lowered our annual growth forecasts for 2021 and 2022 to 8.0% and 5.3%, respectively. Zero-tolerance COVID-19 policy, Omicron and real estate add to risks.”

• “So far, China’s ongoing export strength can be partly attributed to a global (pandemic-related) demand shift to goods, and Omicron may delay a rotation back to services. Meanwhile, we expect investment to pick up in 2022, as we foresee a further piecemeal easing of macro policies. Following a State Council meeting in early December, the PBoC announced another 50bp RRR cut per mid-December, in line with our expectations, and we have pencilled in another 50bp cut for next year. Moreover, we anticipate ongoing moderate fiscal support in the form of increased space for local governments to finance infrastructure, including climate-related, projects. We also expect Beijing to take measures to contain the drags from the real estate sector. Policy inaction would mean that annual growth in 2022 will likely fall below Beijing’s preferred trajectory next year. China’s 2022 growth target will be announced at the annual National People’s Congress in early March 2022, but we may already get a glimpse of this at the Central Economic Working Conference later this month.”