China's economy grows by 8.1% last year, above govt's own target

China's economy grew at an annual rate of 8.1% last year, significantly above the government's own targets. But, as the country grapples with a worsening real estate crisis, new COVID outbreaks, and Beijing's strong no-tolerance policy to virus control, deteriorating growth in the last months of 2021 implies that disaster is still on the horizon. The projected growth rate for 2021 is roughly in line with many economists' predictions. It also exceeds the Chinese government's aim of at least 6% growth for the previous year.

However, according to government numbers released on Monday, GDP grew at the slowest rate in a year and a half in the fourth quarter compared to the previous year. China's central bank dropped a key interest rate for the first time since April 2020 in an effort to encourage activity, and the world's second-largest economy may struggle to develop much faster than that until 2022.

Domestic Growth 'under pressure'

At a news briefing in Beijing on January 17, Ning Jizhe, the president of the National Bureau of Statistics, remarked, "As everyone has seen, domestic growth is under pressure."

Industrial production increased 4.3% in December 2021, accelerating from November's 3.8% increase, last year. This was due in part to the fact that exports remained strong. China's exports increased by 21% in December, bringing the total value of Chinese exports to roughly $3.4 trillion for the year. However, as a result of fresh COVID-related disruptions, such as the huge outbreaks in Zhejiang and Xi'an that forced authorities to cancel amusement venues, shut down companies, and quarantine thousands of people, consumption dropped substantially.

Retail sales rose barely 1.7% in December compared to the same month a year ago, a far smaller increase than November's 3.9% growth. Property investment and the number of new home projects under construction have also decreased. Downward pressure on growth will persist in 2022, wrote Louis Kuijs, head of Asia economics at Oxford Economics, in a research report published on Monday. While he expects real estate activity to eventually start recovering in the second half of the year, Kuijs also suspects that China is unlikely to relax its zero-tolerance approach to COVID until late in the year.

"As a result, we project disappointing consumption growth this year, especially," in the first half of 2022, Kujis added.

According to figures released on Monday, property investment increased by 4.4% last year. However, there was a large drop in December: According to Chaoping Zhu, chief global strategist at JP Morgan Asset Management, investment fell 13.2% in that month alone.

(With inputs from agencies)

(Image: AP)