Morgan Stanley economists believe that this year China's economy may show stronger growth amid the transition to monetary policy easing.
Morgan Stanley predicts that China's GDP will grow by 5.5% this year, while consensus estimates suggest economic growth of about 5%.
In general, Morgan Stanley economists see 4 reasons to accelerate China's GDP growth this year.
First: a pause in policy tightening. "After aggressively reducing the share of borrowed funds, politicians have recently switched to easing monetary and fiscal policies, and announced a reduction in mandatory reserve ratios. Politicians also promised to allocate more loans to small and medium-sized enterprises, mortgages and developers," Morgan Stanley said.
Secondly, support for China's real estate sector. In the second policy of 2021, the country's real estate sector was trapped in a debt crisis, which negatively affected the confidence of home buyers and caused a reduction in real estate sales. "In order to rectify the situation, politicians began to recalibrate the policy, demanding from banks to increase the volume of mortgage loans and lower loan rates. The authorities have also announced plans to launch a managed debt restructuring process to limit default risks," the economists said.
Third: revision of energy targets for 2022. In 2021, energy targets turned out to be "too aggressive", which caused power outages across the country at the beginning of the year. However, as soon as the problem of coal shortage arose, politicians took urgent measures. "Most likely, the energy targets will be revised next year to prevent a repeat of this situation," Morgan Stanley said.
Fourth. Maintaining high export volumes. "We expect that trade will continue to increase against a favorable global background. However, if supply chain failures and bottlenecks normalize next year, China's share in world exports may decrease," experts said.