China’s GDP: five things to look out for before Xi’s bid for a third term

China on Monday will release its estimates for fourth-quarter and full-year gross domestic product growth at a critical economic and political moment for President Xi Jinping, who is seeking an unprecedented third term at the helm of the Communist Party, military and government.

The party’s Politburo last month stressed the importance of stabilizing the economy and financial system, which have been shaken by the fall in property sector. But that did not signal any intention to reject the rules that led to the non-fulfillment of obligations in Evergrande and other major developers.

Balancing stability and fiscal discipline will be tested by Xi’s economic team, led by the vice president Liu He, in the coming months.

Here are five things to keep in mind when publishing.

Will quarterly growth be close to zero or greater than 1 percent?

On a quarterly basis, The Chinese economy has grown only 0.2 percent in the first and third quarters of last year and 1.2 percent in the second quarter.

The number of quarters is a far more accurate measure of the health of the economy than the annual headlines, which fell due to the Covida-19 pandemic and then rose again.

Year-round growth for 2021 should easily exceed the official one a 6 percent target. But another low quarterly reading will put pressure on Liu and the central bank, which he actually controls as head of the government’s Financial Stability and Development Committee, to do more to boost growth.

Are the prospects for the property sector continuing to deteriorate or stabilize?

Real estate prices in the 70 largest Chinese cities fell 0.3 percent in November compared to October – the biggest monthly drop in almost six years.

This is in line with Xi’s promise to bring “common well-being”One of the most unequal countries in the world in terms of wealth distribution. But it could also cause unintended economic consequences if prices fall too fast.

The sector is estimated to account for more than a quarter of total economic output. His troubles in recent months have been reflected in a slowdown in investment in fixed assets, which rose 5.2 percent year-on-year between January and November.

This was slower than projected and well below the 7.3 per cent figure from the start of the year to date for September, when it became apparent that leverage limits would be imposed on developers by 2020. push Evergrande to the default value.

Is Covid’s zero-party strategy sustainable or will it inflict unacceptable costs on the economy?

The Chinese export sector has strong results since the coronavirus was effectively eradicated in the first half of 2020. Periodic blockades in key production areas and large ports, the retention of local clusters has not diminished overall export growth, which is consistently strong.

But that could change as the more portable version of the Omicron threatens to cause even more closures, which along with falling real estate has eased consumer sentiment. Retail increased by only 3.9 percent in November on an annual basis, well below consensus growth projections of 4.7 percent.

This week Xi’an, the provincial capital with 13 million inhabitants, and two smaller cities are under complete locking. Two other major cities, Tianjin and Shenzhen, are conducting partial closures to facilitate city-wide testing.

However, the party is unlikely to soften its uncompromising approach to pandemic control until Congress – likely to meet in October or November – officially approves Xi’s third term in power.

Will increasing pressure on the Chinese economy lead to a stronger monetary policy response?

The Chinese central bank has lowered the reference interest rate on a one-year loan for the first time since April 2020, but by only 5 basis points. It also did not change the five-year benchmark used to determine mortgage prices.

The National Bank of China has preferred to use targeted reserve cuts to try to channel loans to favorite sectors of the economy, such as agriculture and high-tech manufacturing, instead of resorting to “flood-like incentives” that would undermine its efforts to curb recent years. high levels of debt.

Will China’s demographic peak reach even earlier than expected?

The Central Bureau of Statistics is likely to publish its preliminary estimate of the country’s birth rate in 2021, or the number of births per 1,000 people. That fell to 8.5 in 2020 from 10.5 in the previous year, the first time the rate fell below 10.

China recorded 12 million births in 2020 the smallest sum in almost 60 years.