Qatar National Bank expects China’s economy to grow 5% next year

Qatar National Bank (QNB) expects China’s gross domestic product (GDP) to grow by around 5% next year, supported by global manufacturing business expansion and stimulus policies to prevent boom-and-bust cycles.
The bank said in its weekly report that after China began the process of reopening its economy, the Chinese economy is recovering strongly, with a growth rate exceeding analysts’ expectations, after a series of negative headwinds, especially the wave of “Covid-19”, the continued closure of major cities and the real estate crisis… He pointed out that at the beginning of the year, China was one of the main reasons why his expectations for global economic growth in 2023 exceeded general expectations, which was a negative vision. The views of investors and analysts dominated the economic agenda, and the expectations of “Bloomberg” indicate a slow recovery of the Chinese economy after a weak performance in 2022, at 4.8%.
The report noted that the low growth expectations come in the wake of a number of headwinds, such as new waves of Covid-19, weak policy support, and uncertainty in the private sector related to strict regulatory measures for innovative companies. Despite these headwinds, the World Bank expects a stronger cyclical recovery in China in 2022 as it prepares to move away from health measures and strict economic policies.
He added: “It didn’t take long for the situation in China to change, as it began the process of reopening its economy, and despite continued weakness in manufacturing, growth expectations were raised by 70 basis points to 5.5%. Service consumption has boomed until it exceeded pre-pandemic levels. Seven months later, we maintain our forecast of 5.5% for 2023.”
He continued: “The coming period is characterized by greater uncertainty due to the end of the reopening, as can be seen from the contradiction between the upper and lower limits of the forecast for China’s growth in 2024, with the most optimistic analysts expecting a growth of 6.4%, while the most pessimistic predict a growth of 2.8%. This difference is fundamental not only for China, but also for the entire global economy. If the optimistic expectations prove to be correct, China will increase by 1 trillion and 30 billion. US dollars, but if the recession scenario comes true, the gap between the two results is 750%, which is the difference between the GDP of a relatively large country like Spain and a smaller country like Austria.
The report said that the expectations of both pessimists and optimists may be disappointed, and it is expected to maintain a moderate growth of 5% next year, mainly based on two factors: First, the expectations of pessimists may be disappointed because the economic growth rate is slowing down. China’s manufacturing industry is expected to expand against the backdrop of improved global real income, easing energy crisis and long-term decline in inventory levels, which will support the industry. Although the local economy continues to recover, it is still affected by weak global demand.
The second factor, according to a report by Qatar National Bank (QNB), is that the recovery process in China’s services sector has begun to lose momentum and any official support is likely to be limited, as fiscal and monetary incentives have been limited so far and have been adjusted to maintain normal activity levels rather than generate a boom. Investment was part of the facilitation cycle in the past, while additional incentives are expected between now and 2024.
QNB concluded its report by saying that Chinese authorities are eager to see the economy adapt to a growth model that is less dependent on fixed capital expansion, large infrastructure projects and real estate development, and instead favors high-tech manufacturing and consumption, and that long-term growth may naturally slow during this transition.