By Gina Lee
Investing.com –China’s economy grew slower in 2021, potentially impacted by a property market slump. The slower growth also prompted the People’s Bank of China (PBOC) to cut interest rates on policy loans.
Data released earlier in the day showed that the GDP grew 4% year-on-year in the fourth quarter. Forecasts prepared by Investing.com predicted a growth of 3.6% while the growth of 4.9% was recorded in the third quarter.
The GDP also grew 1.6% quarter-on-quarter. Forecasts prepared by Investing.com predicted a growth of 1.1% while the growth of 0.2% was recorded in the third quarter.
The world’s second-largest economy is facing headwinds in 2022 as outbreaks involving the omicron COVID-19 variant continue to pop up throughout the country. Electricity shortages and property sector default also contributed to the slower economy.
“Growth will continue to be weighed down by the property sector and of course, the zero-Covid policy that China is going to continue with,” Oxford Economics lead Asia economist Sian Fenner told Bloomberg.
Meanwhile, industrial production grew 4.3% year-on-year in December compared to a growth of 3.6% in forecasts prepared by Investing.com and November‘s growth of 3.8%.
Industrial output sped up in December but is set to weaken in January, with restrictive measures still in place in many cities ahead of the Lunar New Year holiday. Production curbs on heavy industries in China ahead of the Beijing Winter Olympic Games could also contribute to the weakening.
Retail sales grew 1.7% year-on-year in December compared to a growth of 3.7% predicted by Investing.com and a growth of 3.9% was recorded in November. Consumer spending fell in December as the government tightened measures in several parts of the country, including the cities of Xi’an and Tianjin.
“Retail sales numbers are still quite telling that the zero-Covid policy is still wearing on consumers, and we haven’t seen the recovery that we’ve been seeing in the industrial sector,” said Oxford Economics’ Fenner.
The unemployment rate was at 5.1% while the 5.0% was recorded in November.
Meanwhile, PBOC lowered the rate on its one-year policy loans by basis points to 2.85%, as the property market slump and COVID-19 outbreaks dampened economic growth. It is the first cut since April 2020. The central bank also cut the rate on the seven-day reverse repurchase agreements to 2.1% from 2.2%.