PHOTO
Chinese economic activity, which has been weighed down by multiple factors, including the resurgence of COVID-19 cases, is likely to pick up this year. The Asian giant, the second-largest economy in the world, has set a growth target of 5.5 percent for 2022, which has been met with some skepticism around the globe.
However, J.P. Morgan, in its latest report on equity strategy said it expects the Chinese economy to perform better this year than last, especially relative to current more downbeat projections as base effects are much easier now.
"China’s policy stance has moved from being restrictive at the start of last year towards accommodative more recently. This should help improve the risk-reward for China equities and stabilize the growth outlook. Notably, Chinese M2 appears to be rebounding," JP Morgan analysts said.
The latest Purchasing Managers Index data showed that China's business activity, although still in contraction territory, rose slightly to 41.4 in May from 36.2 in April as some of the restrictions related to the “Zero-COVID Policy” were rolled back.
Additionally, expectations among businesses regarding the 12-month outlook for output improved in May, picking up to its highest for three months. A number of firms hoped for a strong recovery once the virus is contained and restrictions are fully lifted.
According to J.P Morgan, in the last 25 years, China has only missed the growth numbers twice, and that by only 10 basis points on each occasion.
"China credit impulse bottomed late last year, and steel demand, among other, has inflected," the report added.
Meanwhile, Fitch Ratings in May cut its forecast for China’s 2022 GDP growth to 4.3 percent, from 4.8 percent. It revised its 2023 growth forecast slightly higher to 5.2 percent, from 5.1 percent.
(Writing by Brinda Darasha; editing by Daniel Luiz)
