The Two Sessions set the GDP growth target for 2022 at 5.5%, which, excluding 2020, is the lowest level in nearly 40 years in China.After the target was announced, there was intense online debate over whether the gradual decline in GDP growth targets is normal.
In 2021, China’s GDP growth rate was 8.1%. On a quarterly basis, the first two quarters of 2021 saw growth as high as 18.3% and 7.9%, respectively, but then sharply declined to 4.9% and 4.0% in the last two quarters.
This 'rise first, then fall' trend in the annual GDP of 2021 indicates that the pressure on China's economic growth remains this year.As for why economic growth in 2022 is so difficult, the author will gradually analyze the three main drivers of the economy—investment, consumption, and exports—to explain the current bottlenecks in China's economic growth.
1. The 'Magic Needle' that Lost its Power
In the past, developing real estate and infrastructure were seen as the magic needles stabilizing China’s economic growth, but now this policy seems to have reached the end of the road.
Let’s start with real estate. In 2021, the financial troubles of many real estate companies became a landmark event, leading to a rapid winter for China’s real estate industry. Although the total sales area and sales volume of commercial housing in China still hit new highs in 2021, their growth rates significantly narrowed, with the sales revenue growth rate reaching a seven-year low.
When the entire sector is collapsing, no one escapes unscathed. Amid the real estate industry's cold spell in 2021, the top 100 real estate firms experienced rare negative growth in both sales area and sales volume. Changes in the land acquisition-to-sales ratio also provide insight...