China GDP Growth Slows In Q4; PBoC Cuts Lending Rate

China’s economy grew at a slower pace in the fourth quarter of 2021 amid weak property investment and new restrictions imposed at the end of the year to control the spread of coronavirus.

As the economy registered a slower growth, the central bank lowered its lending rates for the first time since 2020 and boosted liquidity.

In the fourth quarter, gross domestic product grew 4.0 percent on a yearly basis, slower than the 4.9 percent expansion posted in the preceding quarter, data from the National Bureau of Statistics showed Monday. However, the pace of growth was bigger than the economists’ forecast of 3.6 percent.

On a quarterly basis, GDP advanced 1.6 percent versus the expected growth of 1.1 percent.

In the whole year of 2021, the economy logged a strong growth of 8.1 percent, better than the government’s target of above 6 percent. However, the faster growth reflects the low base of comparison. GDP had increased 2.2 percent in 2020.

Data showed that industrial production advanced 4.3 percent in December from the last year, which was bigger than the expected growth of 3.6 percent.

On the other hand, retail sales moved up only 1.7 percent and remained weaker than the expected increase of 3.7 percent.

In 2021, fixed asset investment gained 4.9 percent compared to the economists’ forecast of 4.8 percent. At the same time, property investment was up 4.4 percent.

The unemployment rate rose marginally to 5.1 percent in December from 5.0 percent in the previous month.

The People’s Bank of China on Monday lowered the one-year medium lending facility rate to 2.85 percent from 2.95 percent and the 7-day reverse repo rate to 2.10 percent from 2.20 percent.

Economic momentum remains weak amid repeated virus outbreaks and a struggling property sector, Julian Evans-Pritchard, an economist at Capital Economics, said. As such, the economist anticipates another 20 basis point of cuts to PBoC policy rates during the first half of this year.

The upshot is that policy easing is likely to soften the economic downturn rather than drive a rebound, the economist added.

Unless the global recovery is really slow, China will grow faster in 2022 than it did in the fourth quarter of 2021 with easier monetary and fiscal policy, Iris Pang, an ING economist, said.

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