China’s Performance- November 2021
China's growth path teeters as the manufacturing juggernaut faces new headwinds leading into the new year. Importantly, the 'workshop of the world' remains subdued in manufacturing activity, outweighing easing energy shortage across November. While supply-constraints have eased up alongside isolated price reductions for inputs, demand has been left struggling and grasping for a lifeline. As such, growth is forecast to slow to 5.3% according to Bloomberg, with an expansionary policy trajectory likely to be crucial in buttressing short-term demand. China's policy narrative has been interesting over the past year. Austerity and restraint shown by policy organs over 2021 have created uneven growth patterns, leading to some unsavoury outcomes in the realms of employment and consumption, the latter of which still affected by resurgences in virus cases. While export demand is a plump safety cushion for the economy, much of the economy's growth plan into 2022 hinges on its proactive macro policy tools. A larger pool of fiscal savings and monetary slack suggests Chinese policymakers have more room to play in the next year, with policy manoeuvrability a keystone to this strategy.
In doing so, China is well aware of the manifold threats it faces, both economically and socially. For instance, their zero-tolerance stance on Covid-19 has dealt a heavy blow to domestic consumption, while ongoing export resilience is likely to falter due to waning foreign demand for durables around the world. Rigidities in the country's energy markets, much of which is still reliant on coal or in the costly phase of liberalisation, is likely to feed into shortages and higher costs during this liminal stage. Real estate has been a real thorn in the side for regulators in China this year, the notorious downfall of Evergrande prompting calls for reform as well as a general push to deleverage the sector. Across the ocean, state-to-state warfare wages on with the US as tensions over decoupling between the two economic powerhouses continues to broil. Experts point out further geopolitical strife, security concerns and technological divergence will see new restrictions on trade and finance come into effect in the near future. Finally, unemployment remains a concern for 2.12 million Chinese job aspirants who sat the 'guokao', the country's national civil service examination. Considered an 'iron rice bowl' for those accepted, younger generations have shown a clear preference for job security and stable income as youth joblessness remains persistently high. Undoubtedly, a treacherous path to navigate into 2022.