Qatar National Bank: There are opportunities to adjust and increase the growth of the Chinese economy

Mark
Written By Mark

Qatar National Bank (QNB) revealed that there are opportunities to amend and increase China’s GDP growth expectations and raise it to 5.5 percent, in line with current growth potential, attributing this to two main factors, which are the increased commitment on the part of the Chinese government to achieve stronger growth rates, and the availability of… More room for monetary policy to lower interest rates.
Qatar National Bank said in its weekly report that despite the initial reactions in the markets, analysts still doubt the extent of the Chinese government’s commitment to implementing large and sustainable interventions to support the economy, and whether this will strongly affect consumer sentiment and real activity.
The bank indicated that analysts’ expectations are still modest regarding growth prospects, as this is evident in the Bloomberg consensus forecast, which is considered a tool for monitoring the expectations of economists, think tanks, and research houses, which indicates that the Chinese economy will achieve modest growth of 4.8 percent and 4.5 percent in the coming period. Years 2024 and 2025.
When addressing the first element of its analysis, the report pointed out that the new round of stimulus measures indicates that policymakers are interested in growth and committed to supporting it.
Moreover, it also indicates that the announced 5 percent GDP growth target remains a key performance indicator to be achieved.
The report added: There were concerns in the recent past that the Chinese government’s economic key performance indicators were linked to the technology roadmap, that is, increasing the value chain in strategic sectors such as space, artificial intelligence, quantum communications and computing, and since the enactment of “massive stimulus measures” is no longer out of the question. Accounts have already become necessary to achieve targeted growth. More easing measures are expected in the near future, creating the right conditions for economic expansion.
The report explained that the announcement of this stimulus package quickly led to renewed vitality and enthusiasm in the desire of investors, speculators, and businessmen to accept risks, and as a result, Chinese asset prices rose significantly, with stock prices rising by 38 percent within three weeks, before declining and stabilizing. At a high level.
It is worth noting that as concerns emerged about the adequacy of the announced stimulus measures in promoting growth, directives were issued stating that the government is ready to launch further measures if necessary to achieve growth or financial stability.
Regarding the second element mentioned in the report, it pointed to the beginning of the “global easing cycle”, in which major central banks reduce interest rates, which is also favorable for China, and this allows for more stringent economic measures to be taken by the Chinese authorities, especially the People’s Bank of China, and with the establishment of the Bank of China. By cutting interest rates further, the People’s Bank of China will have more room to ease without causing capital to flow out of China.
The report stated that in recent years, the difference in interest rates between the United States and China has changed significantly in favor of the United States, as rising US yields have attracted capital flows from the rest of the world, including China, and this has created pressure on the renminbi, which has declined. Its value has increased by 13 percent since its last peak in February 2022.
The report said that the US Federal Reserve’s monetary easing cycle would open the door to more monetary stimulus from the People’s Bank of China, providing tailwinds for the Chinese economy.
Lower interest rates increase liquidity and credit growth, encouraging the return of private and regional investments. This would also provide relief to debtor entities and boost consumer sentiment.
In general, the report believed that improved market sentiment, increased commitment by the Chinese government to achieving stronger growth rates, and greater room for monetary policy to reduce interest rates should favor an acceleration of GDP growth to 5.5 percent in 2025.