{"id":9693,"date":"2022-03-21T07:30:42","date_gmt":"2022-03-21T07:30:42","guid":{"rendered":"https:\/\/focus.cbbc.org\/?p=9693"},"modified":"2025-04-23T09:43:02","modified_gmt":"2025-04-23T09:43:02","slug":"chinas-stimulus-question-is-back","status":"publish","type":"post","link":"https:\/\/focus.cbbc.org\/chinas-stimulus-question-is-back\/","title":{"rendered":"China\u2019s Stimulus Returns"},"content":{"rendered":"

China is fast-tracking spending on new technologies like 5G, smart grids and renewable energy to support its position as a global leader in new technologies, writes Torsten Weller<\/strong><\/span><\/h2>\n

Ever since the Chinese government declared financial risk and soaring debt a key threat to the country\u2019s stability in 2016, the country\u2019s leaders have been reluctant to use large-scale monetary stimuli to shore up the slowing economy. Even the severe hit from the Covid-19 pandemic in 2020 did little to change this attitude.\u00a0<\/span><\/span><\/p>\n

Yet weak economic data in the second half of 2021 could change Beijing\u2019s calculus and convince them that its supply-side focus on lower taxes and social insurance contributions won\u2019t be enough to deliver the hoped-for growth in 2022.\u00a0<\/span><\/span><\/p>\n

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But while more spending on traditional infrastructure and housing will probably pick up in the coming months, the key focus of Chinese policymakers \u2013 who recently gathered for the annual Two Sessions \u2013 will probably be more forward-looking. Chinese leaders have already indicated that future government investments will concentrate on what they call \u2018new infrastructure\u2019 \u2013 referring to advanced technologies such as 5G, AI, and green energy.\u00a0<\/span><\/span><\/p>\n

Although investing more in new base stations and wind farms will not necessarily help deliver economic growth in the short term, it could cement China\u2019s position as a global leader in the next wave of technological innovation \u2013 making it an even more important market for UK companies and investors.<\/span><\/p>\n

Background\u00a0<\/span><\/span><\/h4>\n

Weak growth figures in the last quarter and the impact from a struggling real estate sector could finally force Chinese leaders to open the monetary faucets again. Houze Song \u2013 an economist and fellow at MacroPolo, the Paulson Institute\u2019s think tank \u2013 reckons that the government could use a short but strong stimulus in the first quarter to stabilise the economy ahead of this year\u2019s 20th Party Congress in the autumn.\u00a0<\/span><\/span><\/p>\n

Growth estimates by local governments also support this expectation. According to provincial work reports, Chinese provinces are forecasting an average growth of 6.3% this year. This is not only 1% down from the 2021 targets, but is 2% lower than last year\u2019s actual growth. The common growth target for 2022 is 5.5% with eight out of 31 provinces, including Shanghai and Guangdong, aiming for it. Last year, the most common goal was 6%, in line with the national growth target.\u00a0<\/span><\/p>\n