China's 2022 economic targets confirm pressure on softening demand

On March 5, China released its series of development targets for 2022 including the Gross Domestic Product (GDP) growth at about 5.5% on year, and all these have clearly confirmed the pressure that the world's second largest economy expects to feel in softening demand, increasing supply and weakening market sentiment, as Beijing has reminded ever since the start of this year.

Among the key targets are also that China will aim to generate around 11 million new jobs, to maintain the unemployment rate within around 5.5%, and to cap the country's Consumer Price Index (CPI) growth within 3% on year.

In comparison, the country achieved an 8.1% on-year GDP growth, created nearly 12.7 million new jobs, controlled the unemployment rate at 5.1%, and its CPI grew by merely 0.9% on year.

At the press conference on March 7, Chinese government official explained that the GDP growth target for 2022 has taken into consideration of the performances over 2019-2021, the geopolitical situation, the domestic challenges, and a safe baseline for the country to generate sufficient new jobs especially when college graduates alone may exceed 10 million for this year.

Besides, China's medium, small and micro-sized enterprises, the crucial new job generators in the country, are still struggling despite the series of policy and financial support from the authorities including a total taxation and fee relief at Yuan 1.1 trillion ($170 billion) in 2021.

China managed to cushion the impact of a much higher 8.1% on-year Producer Price Index (PPI) growth in 2021 on its CPI, though the chances are slim for the country to hold the tide at the bay for CPI for another year, or the manufacturers in automaking, home appliance and electronics products as the middle-stream will take a harder blow with rising raw material costs while rather stable sales prices.

Soaring energy prices in the world since around September-October 2021 are adding challenges for China to achieve its CPI target, as energy products such as gasoline and diesel prices among the country's consumer goods, for example, grew by 6.2% and 6.7% on month respectively or up 23.9% and 26.3% on year for February, or ranking probably among the top of all the consumer goods, Mysteel Global noted from the NBS sharing.

"China hopes to further boost its domestic consumption, but then citizens need to have jobs, have incomes, and then have rather reasonable consumer goods prices before they feel contented to spend money, so all these targets are to a large extent, inter-linked," a China-based economist commented.

A slowing economic growth, though, may ease the burden on China's power supply modestly in 2022, as China Electricity Council expects an overall balance in the country's power market with the power generation to grow by 9% on year and the demand from all the aspects to be up 5-6% on year, though supply may be stretched in some consumption peak seasons such as summer.

In 2021, China's power generation grew 8.1% on year, while power consumption for the whole country surged 10.3% on year.

Written by Hongmei Li, li.hongmei@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.