While much of the world was downgrading China’s GDP growth estimates for 2021, the Trends Journal had forecast it would grow by 8 percent. We were 0.1 percent off: China’s economy grew 8.1 percent overall in 2021 on the strength of its exports to a COVID-plagued world.
And, we had stayed with that 8-percent growth forecast for 2021 as analysts pared back their outlook for China’s performance amid its real estate slowdown and tech-sector crackdown.
China’s GDP expanded by 4 percent in 2021’s fourth quarter alone, better than Reuters’ projection of 3.6 percent, with industrial production adding 4.3 percent to offset a modest slump in consumer spending.
In December, auto production gained for the first time since April, growing by 3.4 percent, year on year, helping the country’s industrial output for the month add 4.3 percent compared to the same month a year earlier.
However, retail sales grew by a disappointing 1.7 last month, less than half the 3.7-percent year-on-year expansion expected by analysts Reuters had surveyed.
“We must be aware that the external environment is more complicated and uncertain, and the domestic economy is under the triple pressure of demand contraction, supply shock, and weakening expectations,” the National Bureau of Statistics said in a statement announcing the results.
For all of 2021, investment in fixed assets was up 4.9 percent, in real estate 4.4 percent, and in manufacturing 13.5 percent.
For this year, the outlook for China’s economy is less optimistic.
“The better-than-expected GDP data doesn’t change the big picture: China’s economy is under multiple headwinds for now and a policy easing cycle is underway,” Larry Hu, chief China economist at Macquarie, wrote in a recent research note.
Because of China’s latest draconian measures against the COVID virus, Goldman Sachs has cut its 2022 growth estimate for the country from 4.8 percent to 4.3, noting that domestic consumer spending will suffer.
“We think China has the option to ease COVID restrictions, which could boost consumption and market confidence; but it would be highly unlikely for it to abandon the no-tolerance approach before the Beijing Winter Olympics and the annual parliamentary meeting in March,” Bruce Pang, China Renaissance’s research chief, said in a statement cited by CNBC.
TREND FORECAST: If China does not ease COVID restrictions, while its exports will stay solid, there will be a continued decline in consumer spending, which is an essential element of its dual circulation policy for driving economic growth. 
Therefore, we do forecast that China, which has lowered interest rates this week, will also lower its grip on the general population and begin to wind-down the COVID War that began in Wuhan on Chinese Lunar New Year 2020…the Year of the Rat.
China’s global trade surplus totaled $676 billion in 2021, 26 percent more than in 2020 and a new record.
Chinese exports grew by 30 percent last year to $3.36 trillion, with each month showing double-digit gains over the same month a year before.
December’s $94.5-billion overage set a new monthly record, beating the old one of $84.5 billion set in October. 
About half of China’s trade surplus came from the U.S.
After recovering quickly from the COVID infestation in early 2020, China became “manufacturer to the world” as other nations shut down their economies amid the COVID War.
China’s ability to supply the world’s needs from toys to surgical masks persisted even through materials shortages and supply-line chaos.
“China’s supply chain capacity has held up much better than the rest of the world,” Larry Hu, Macquarie’s chief China economist, told the Financial Times, “so it gets a larger share of the pie.”
China has focused on importing mainly raw materials, keeping better-paid manufacturing jobs at home. It also has created targeted supports and incentives that helped its businesses become more competitive abroad.
At the same time, the country has worked to stimulate its consumer economy without providing generous subsidies or stimulus money to households, as many western nations have.
Much of the funds disbursed by governments to U.S. and European households has been used to buy goods from China, The New York Times noted.
TRENDPOST: The balance between maintaining a strong manufacturing economy for exports and developing a thriving domestic consumer economy has been the foundation of China’s “dual circulation” economic policy, which we have detailed extensively in articles such as “China Announces Dual Circulation Economic Policy” (9 Sep 2020), “In China, Domestic Brands Outpace Western Icons” ( 29 Jun 2021), and “Foreign Investors Pour Another $120 Billion Into Chinese Markets” (16 Nov 2021).
China’s dual circulation economy is the leading example of our Top 2022 Trend of nations, businesses, and households striving for self-sufficiency.
No Trade War
In January 2020, the Trump administration inked the “Phase One” trade deal with China, which required the nation to buy an additional $200 billion of U.S. goods and services in 2021.
China dramatically failed to meet that requirement of the treaty, claiming that the COVID infestation had hampered its ability to live up to its commitment, as we reported in “China Fails to Purchase Promised Amounts of U.S. Goods and Services” (11 Jan 2022).
“Estimates by western economists indicate that the widening trade surplus is now the main engine keeping China’s economy going, as real estate and other sectors falter,” the NYT reported.
TRENDPOST: We noted almost a year ago in “Trade War? U.S. Lost It” (9 Feb 2021) that Trump’s trade deal with China would fail to produce the results that it promised.
“The Trump administration never had a feasible plan for reducing the trade deficit,” Mary Lovely, senior fellow at the Peterson Institute for International Economics, told Politico then. “The 2017 tax cut ensured that the U.S… would continue to spend more than it produced, hence the… deficit.” 
Regardless of the trade deal’s intentions, the COVID economy’s shutdown around the world de facto guaranteed that the U.S., like other nations, would ramp up purchases from China to make up for goods we were no longer making at home.
TREND FORECAST: The world will continue to depend on Chinese factories, although to a lesser extent than it has. Inflation will force more households to curtail their purchases and our Top 2022 Trend toward greater self-sufficiency among businesses and households will cause nations to gradually slow the rate of increase in their imports.
For the first time since April 2020, the People’s Bank of China (PBOC) has trimmed the interest rate on its benchmark one-year policy loans, paring 10 basis points and dropping the rate to 2.85 percent.
The bank also reduced the rate on its seven-day repurchase loans and loosed 200 billion yuan, equivalent to about $31.5 billion, into the country’s financial markets.
“The move suggests China’s economy is weak and it will trigger a significant slide in borrowing costs,” Yewei Yang, an analyst at Guosheng Securities, said to Bloomberg.
With the change, the 10-year government yield fell two basis points to 2.78 percent, while the overnight repo rate slid six basis points.
The bank’s policy shift follows the real estate market’s instability brought on by over borrowing, a regulatory crackdown that has hobbled key tech companies, and an overall slowdown forced by China’s zero-tolerance policy for COVID cases, exemplified by a recent incident in which a single case of the virus was diagnosed in an office building and authorities quarantined the building with the workers still inside.
The bank is likely to lower its prime loan rate on 20 January, Larry Hu, chief China economist at Macquarie Bank, has predicted.
TREND FORECAST: Think about it! The PBOC is perking up China’s economy by lowering interest rates at a time when other central banks are pulling out of the stimulus business and raising interest rates. 
The U.S. Federal Reserve will end its $120-billion monthly bond purchases in March and is expected to raise interest rates quickly thereafter; the European Central Bank is ending its €185-trillion bond-buying program this month or next. And we forecast they too will be forced to raise rates.
Therefore, the bottom line is that as much of the world’s economies decline, China, while losing some of its export market because of declining demand, will gain economic strength with its dual circulation policy that will allow businesses and consumers to borrow more for less. 
After declining for three consecutive years, China’s domestic auto market grew 4.4 percent last year to 20.1 million vehicle sales, thanks to growing acceptance of electric vehicles.
Sales of full-electric and plug-in hybrid vehicles rose 4.4 percent in 2021 to about 2.99 million, making up about 15 percent of new-car sales, while gas buggies sales slipped by about 4 percent, the China Passenger Car Association reported.
EV sales were boosted by government subsidies, which have been steadily reduced. Stipends now average around $2,000 and will end entirely late this year.
This year’s sales will add another 5 percent, the association predicted, with EVs making up about a quarter of the market.
Other analysts also expect the market to grow but at a slower pace than the association foresees, The Wall Street Journal said. The analysts see growth in 2022 coming again from EVs, with sales of gas-powered vehicles remaining flat or slipping again slightly.
However, all might not go smoothly.
“A continued contraction in demand caused by the overall economic slowdown and [lockdown measures], coupled with the recovery of production as the chip shortage eases, would shift China’s car market from an over-demand last year to an oversupply,” Paul Gong, UBS’s analyst of China’s car market, told the WSJ.
EV manufacturers also are facing looming shortages and subsequent price hikes for key minerals such as cobalt and nickel (see related story in this issue).
In 2021’s last quarter, China’s car sales slid 11 percent compared to the same period in 2020.
The ongoing shortage of computer chips cost Volkswagen, the biggest foreign auto seller in China, 14 percent in sales, the company estimated, with Nissan Motor Co. giving up 5.2 percent and Nissan Motor 4 percent.
In contrast, China’s domestic makers set records, with BYD selling almost 600,000 electric cars last year; Li Auto, NIO, and Xpeng each delivered about 90,000 EVs.
Tesla’s Shanghai factory turned out about 475,000 cars in 2021, selling roughly 315,000 of them in China, according to the WSJ.
TREND FORECAST: Despite growing demand, due in part to tax credits for buyers, the EV market may well slow in 2022 as a scarcity of chips and other materials raises prices and reduces production.
However, China’s command economy has the option of continuing to subsidize EV purchases as part of its plan to meet its Paris climate commitments. If it does, EV sales will continue to gain a greater percentage of the auto market. 
Investors are flooding the Chinese tech scene and investing in companies that are finding innovative ways to improve the country’s so-called “hard tech,” which has been a key ambition of the Chinese Communist Party.
The Wall Street Journal reported that there has been a clear shift in investments away from e-commerce giants in the country to companies that produce semiconductors, biotechnology, and information technology. This all fits quite nicely in Beijing’s new five-year plan that calls certain technologies vital to its national security.
The paper reported that these “hard tech” companies have raised $129 billion in capital in 2021. Besides the outside investments, Beijing also announced a 7 percent increase in annual spending earmarked for some of these companies, which marks a bigger jump in spending than for its military. (See “WAR CRIME GANG GETS RICHER” and “CHINA CHALLENGING U.S. HI-TECH DOMINANCE.”) The goal is that China will be able to rely far less on other countries to provide technologies in the artificial intelligence and quantum computing space.
The investors seem to be undeterred by President Xi Jingping’s willingness to inject the government in the tech marketplace. Didi, the rideshare app, was yanked from all mobile-app stores and Jack Ma, the billionaire founder for e-commerce site Alibaba, faced a major regulatory crackdown after he criticized Beijing’s financial regulators.
Dan Wang, a Beijing-based tech researcher, wrote in Foreign Affairs that Xi’s push to technological self-sufficiency was sparked by former U.S. President Trump’s trade war.
“Trump’s gambit accomplished what the Chinese government never could: aligning private companies’ incentives with the state’s goal of economic self-sufficiency,” he said.
TREND FORECAST: These news items out of China underscore the growing success of its dual circulation economic policy, designed to make the country less dependent on exports by building a strong domestic consumer economy.
Together, these developments also reflect our Top 2022 Trend of companies and countries boosting self-sufficiency in both production and consumption.
And as for China looking at America for fashion, style and upbeat consumer trends… it is a time gone by. Thus, “Made-in-China” will be their entertainment and pop-culture future. 

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