China orders more growth – and will get it

While few believe China's official growth figures, the economy should pick up.

Chinese GDP growth targets, "once set, have a way of coming true", says Economist.com. So next year, on 17 January, expect the government to announce that the economy expanded by 6.5%-7%, the targeted range set out at this week's National People's Congress, the "rubber-stamp parliament".

Few believe that growth is anywhere near 7%, but we can expect it to tick up. Poor trade data, due to a lacklustre global economy and February's Chinese New Year holiday, hit the headlines this week. But the overall outlook remains encouraging. Not only have capital outflows slowed, meaning the state won't have to spend so much of its foreign-currency reserves on propping up the yuan, but "the rescue team of expanded monetary and fiscal stimulus is on the way", say Tom Orlik and Fielding Chen on Bloomberg. That means that in the long term China will have yet more debt to work off.

But for now, confidence in the growth outlook should rise. The state has set a budget deficit target of 3% of GDP, up from 2.3% last year, with much of the extra borrowing being spent on funding tax cuts rather than just more government spending. China is also aiming for money supply growth of 13%, up from 12% this year. Previous interest-rate cuts and loosened lending restrictions have already given borrowing a kick. New lending in January rose by $385bn, a record for a single month.

Meanwhile, Barclays notes that one particular gauge of money supply growth is at a four-year high. "A hard landing for the Chinese economy is not around the corner." No wonder commodities markets are feeling more chipper.

Recommended

The after effects of the gas-price shock
Economy

The after effects of the gas-price shock

In the wake of the recent spike in the natural gas price, we can expect slower growth, an industrial recession – and a newly assertive Russia, says Ma…
17 Oct 2021
The charts that matter: bond yields slip while bitcoin tops $60,000
Economy

The charts that matter: bond yields slip while bitcoin tops $60,000

Cryptocurrency bitcoin soared to over $60,000 this week, while government bond yields fell back. Here’s how that has affected the charts that matter m…
16 Oct 2021
Whistleblower allegations – where now for Facebook?
Tech stocks

Whistleblower allegations – where now for Facebook?

The social-media giant has come in for some fierce criticism following revelations from a former employee. Just how much damage has been done?
16 Oct 2021
When will supply chains sort themselves out and what might that mean for inflation?
Inflation

When will supply chains sort themselves out and what might that mean for inflation?

Right now, congestion in global supply chains is driving inflation higher. At some point, that will sort itself out. So will that mean an end to high …
15 Oct 2021

Most Popular

Why the world’s most important economic data release has unnerved markets
US Economy

Why the world’s most important economic data release has unnerved markets

The US added only 194,000 jobs in September, far shorter than the 500,000 that were expected. John Stepek explains why markets didn't react as they no…
11 Oct 2021
How to invest in SMRs – the future of green energy
Energy

How to invest in SMRs – the future of green energy

The UK’s electricity supply needs to be more robust for days when the wind doesn’t blow. We need nuclear power, says Dominic Frisby. And the future of…
6 Oct 2021
Inflation is still one of the biggest threats to your personal finances
Investment strategy

Inflation is still one of the biggest threats to your personal finances

Central bankers and economists insist inflation will be gone by next year. We're not so sure, says Merryn Somerset Webb. So if you haven’t started to …
1 Oct 2021