China's GDP growth rate in 2021 is likely to be 8%, with a projected 3.7% 
growth in Q4, according to a report recently released by Peking University, 
HSBC Business School (PHBS) Think Tank. Although China was the only major 
economy to record growth in 2020, it has been dealing with multiple challenges 
to its expansion in 2021, and the real economy remains sluggish, says the 
report.

PHBS Think Tank sees that the downward pressure on China's real economy is 
still high in the fourth quarter, pointing to weak consumption, a significant 
decline of investment in infrastructure and real estate, and CPI upward 
pressure. Since the prices of some upstream raw materials are still at high 
levels, the rise in the prices has begun to be transmitted to the middle and 
downstream products.

Due to triple pressure from demand contraction, supply shocks, and weakening 
expectations, China's annual GDP growth rate is expected to be 5.0% in 2022, 
according to PHBS Think Tank. The slowdown in the property market and 
consumption is expected to continue acting as headwinds to the growth of the 
world's second largest economy. Based on its DSGE model, the Think Tank 
estimates that a 10% decline in real estate investment will lead to a 2.1% 
decrease in GDP growth, causing the loss of 6.85 million jobs in the related 
sectors.

As the omicron variant, persistent supply chain disruptions, and inflation 
pressures are constraining the global economy's recovery from the pandemic, 
some of the factors supporting China's exports are expected to be weakened in 
2022. The report includes the forecast results that the contribution to China's 
GDP from consumption, investment, and net export will be 1.9 percentage points, 
1.7 percentage points, and 1.4 percentage points, respectively.

PHBS Think Tank suggests that more proactive policies need to be implemented in 
2022. It advises that the government strengthens the fiscal policy to increase 
domestic consumption and infrastructure investment and ensure the supply of 
upstream raw materials. Furthermore, the report concludes that effective 
policies for loan granting and financing are needed to avoid the hard landing 
of the real estate industry.

SOURCE: Peking University HSBC Business School