China’s economy bolsters as it eases monetary policy, investment firm says
China’s economy is bouncing from a “mini-downturn” into an upswing as the country eases policy, according to investment bank Morgan Stanley.
The country tightened its monetary policy, embarking on “aggressive deleveraging” as it sought to slash debt in the property sector. It managed to cut the debt-to-GDP ratio by 10 percentage points in 2021 — a magnitude not seen since the 2003 to 2007 period, according to Morgan Stanley in a Dec. 21 report.
But, according to Morgan Stanley, “The pace of tightening proved to be too aggressive, considering that the recovery in consumption growth was curtailed because of the Delta wave and China’s continued Covid-zero approach, which kept consumption below trend.”
Still, the bank said it is “more bullish than consensus” and sees GDP growth in China accelerating to 5.5% in 2022.
Analysts generally expect China’s economy to grow by about 5% in 2022. Deutsche Bank estimates growth of about 5%, while Nomura has a forecast of 4.3%. Analysts have also trimmed their forecasts for China’s 2021 GDP, with estimates ranging between 7.7% to 8.8%.
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