Despite diverse challenges, the year 2021, which marks the beginning of the 14th Five-Year Plan (2021-25) period, has seen new progress on China's high-quality development, according to the annual Central Economic Work Conference, taking place in Beijing from December 8 to 10. The meeting reviewed this year's economic performance and outlined priorities for 2022.

Economic work for 2022 should prioritize stability while pursuing progress, as China is facing pressure from demand contraction, supply shocks and weakening expectations, as well as external uncertainties caused by the lingering impacts of the COVID-19 pandemic, according to the meeting.

Facing these challenges, it underlined the need to improve China's economic foundations, enhance technological innovation, and expand opening up, stressing that the country's strong economic resilience and fundamentals will continue to underpin its steady growth in 2022.

Hard-won growth

As revealed during the meeting, since the beginning of 2021, China has maintained stable economic development through effective pandemic control, and made progress on improving technological innovation, industrial chain resilience, reform and opening up, people's wellbeing and green development. In October, the International Monetary Fund (IMF) projected that China's growth will stand at around 8 percent this year.

Data from the National Bureau of Statistics (NBS) showed that major economic indicators have seen sound recovery. In the first 11 months, value-added industrial output went up 10.1 percent. Total retail sales of consumer goods and fixed assets investment, which are major driving forces of the economy, both registered positive growth.

Foreign trade saw better-than-expected performance. Total imports and exports expanded 22 percent year on year to 35.39 trillion yuan ($5.55 trillion) in the first 11 months, with exports and imports both jumping from the previous year, the General Administration of Customs of China said.

According to the Ministry of Commerce, paid-in foreign direct investment between January and November reached 1.04 trillion yuan ($157.2 billion), up 15.9 percent year on year.

Greater efforts have been made to promote the use of renewable energy resources. The national carbon market began online trading in July, allowing participants to buy and sell permits to emit carbon dioxide or other greenhouse gases. In October, the government embarked on a series of large wind power and photovoltaic projects in desert areas straddling Inner Mongolia Autonomous Region, Gansu and Qinghai provinces, and Ningxia Hui Autonomous Region.

Efforts to ensure people's wellbeing remained in place. More than 12 million jobs have been created in urban areas in the first 11 months of this year, achieving the 11-million whole-year target ahead of time. The surveyed urban unemployment rate averaged 5.1 percent in the period, down 0.6 percentage point.

China possesses a large working-age population and the quality of labor forces is improving. The increasing supply of professionals coupled with rapid technological progress will provide strong impetus for economic growth, NBS spokesperson Fu Linghui said at a press conference on December 15.

Stability counts

China's economic growth is facing new downward pressure on demand, supply and expectations, Wen Bin, chief analyst at China Minsheng Bank, told Beijing Review. GDP growth in the third quarter of this year stood at 4.9 percent, up only 0.2 percentage point month on month. That adds to the challenge to stabilize growth next year.

Consumption has not yet recovered to pre-pandemic levels and investment growth has not reached the expected goals. Although capital entering the manufacturing industry has seen notable growth, the infrastructure and property sectors witnessed substantial declines.

While speaking at the Annual Conference of China's Economy 2021-22 on December 11, Han Wenxiu, a senior official with the Central Committee for Financial and Economic Affairs, said shortages of coal, power, containers at ports, computer chips and labor forces have become prominent problems.

The expectations of market players were also affected. After two months of contraction with the reading remaining below the boom-bust threshold of 50, the manufacturing purchasing managers' index edged up to 50.1 in November.

Next year, China will face great employment pressure as the number of college graduates will reach approximately 10.76 million, up 18.4 percent year on year, compared with around 5 percent in previous years, Wen said.

External challenges are also severe. The insufficient recovery of global industrial and supply chains from the pandemic has led to an energy crunch and driven up prices of global commodities in 2021, placing pressure on Chinese enterprises, especially small and medium-sized enterprises (SMEs), according to Wen. The new Omicron variant of COVID-19 has added to current uncertainty. Moreover, global economic recovery this year is largely attributed to the extra-loose monetary policies of major economies. As some countries are phasing out policy stimulus, global economic downward pressure will mount.

In response, maintaining stability tops China's policy agenda for the year to come. Key tasks include refining macro policies, boosting the vitality of market players, driving domestic demand and pushing forward high-quality and institutional opening up. The meeting also placed emphasis on ensuring people's wellbeing, ramping up support for technological innovation and promoting more balanced and coordinated regional development.

Rising to the occasion

Considering growing downward pressures and the meeting's emphasis on integrating cross-cyclical and counter-cyclical macro-regulation policies, measures will be rolled out to stabilize the economy, Gao Ruidong, an economist at Everbright Securities, told Xinhua News Agency.

Proactive fiscal policies will be more effective and emphasize precision and sustainability, according to a statement released after the meeting. It also said monetary policies, while remaining prudent, will be flexible and appropriate, adding that liquidity should be maintained at a reasonable and ample level.

New tax and fee reduction policies are in the pipeline to shore up support for SMEs, and financial institutions will be encouraged to bolster financing support for the real economy, technological innovation and green development.

The People's Bank of China, the central bank, cut the amount of money financial institutions must set aside in reserve by 0.5 basis point from December 15, which released 1.2 trillion yuan ($188 billion) worth of long-term liquidity into financial markets.

The meeting pledged efforts to boost market expectations and promote fair competition. Greater focus will be laid on reforming state-owned enterprises and sectors that are monopolistic in nature, such as power grids and railways, providing a more favorable environment for foreign businesses, and attracting more multinationals to invest in China.

Calling for greater awareness of the nature of capital and its law of behavior, the meeting said it is essential to give full play to the positive role of capital while tightening regulation.

Earlier this year, market regulation authorities penalized a dozen of companies under anti-monopoly laws, including operators of the country's several largest online platforms. In November, the law on personal information protection took effect, further clarifying restrictions and regulations on business operations of Internet firms.

Regarding green development, the meeting highlighted the need to improve the clean and efficient use of coal and increase the absorptive capacity of new energy.

It decided that the newly added renewable energy and energy used as raw materials would be excluded from the cap on total energy consumption. Priority will be given to achieving an early shift from controlling the amount and intensity of energy consumption to controlling the amount and intensity of carbon emissions, as well as the early establishment of an incentive and constraint mechanism for pollution control and carbon reduction.

To meet people's basic needs, policies will be adopted to develop the long-term rental housing market, build more affordable housing and make the real estate market better meet homebuyer demands.

The meeting also called for more support for stabilizing employment, ensuring agricultural output, boosting rural areas, and enhancing public services on education, healthcare and elderly care.

Growth outlook

As projected by the IMF, global economic growth would reach 4.9 percent in 2022. It has also lowered its outlook for China's growth next year, from a July prediction of 5.7 percent to 5.6 percent in October.

"Global economic growth is expected to slow down next year. As external demand shrinks, China's foreign trade growth in 2022 may not be as robust as this year," Xu Hongcai, Deputy Director of the Economic Policy Commission under the China Association of Policy Science, told Beijing Review. He said the foreign trade growth is likely to drop to below 10 percent in the fourth quarter of this year and in the first half of 2022.

The rise of commodity prices and the introduction of carbon tariffs in some countries will affect China's foreign trade growth. Along with the recovery of production in other emerging economies, the number of Chinese manufacturers' overseas orders may decrease in future, Xu said.

According to Xu, global economic growth faces challenges from inflation, disruption of supply chains, energy shortages and climate change, all of which can affect China's economic performance. Weakening external and domestic demand makes it necessary for China to focus on ensuring stability. The government can channel investment into building infrastructure in advance, and drive domestic demand by boosting consumption and investment.

"Since consumption still plays a fundamental role in economic growth, the government needs to further stabilize employment to ensure people's income. To achieve the goal of common prosperity, the potential of consumption should be further unleashed," he said.

Citing risks in the domestic financial sector and the property market, Xu suggested that the authorities also need to ensure stability of the exchange rate of the yuan, enhance the regulation of cross-border financing, and keep an eye on the changes of other major economies' monetary policies to fend off external risks. 

(Print Edition Title: The Greater Calling)

Copyedited by G.P. Wilson

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