As China’s Monetary Policy Eases Further, Q1 GDP Rises

The first quarter of 2022 saw higher-than-expected GDP growth in China, with an increase of 4.8% compared to 4.4% expected, but recent COVID-19 shutdowns have already started to dampen performance , reported the Financial Times.

As consumer spending slows – retail sales fell 3.5% overall in March year-on-year – the People’s Bank of China said on Friday it was cutting 0.25% its reserve requirement ratio for banks as it tried to inject liquidity into the economy. . It could bring much-needed relief as Shanghai, the country’s financial hub, continues to be locked down by COVID-19, and China confirms the first three pandemic-related deaths since the virus emerged in 2020.

“The market was expecting a 50 basis point reduction in RRR, although the PBOC statement made it clear that it would gradually reduce rather than remove the band-aid,” KraneShares explains on its China Last Night blog.

China has lowered its growth targets for the year, but as it is an election year, public policy is expected to be very supportive of meeting these growth targets. Officials are also increasingly talking about downplaying the impacts of the pandemic centered on shutdowns as the economic repercussions mount.

“Vice Premier Liu He led another meeting on permitting port and logistics activities despite Shanghai’s restrictions,” writes Kraneshares, a groundbreaking policy by the Chinese government in its zero-tolerance approach to the COVID-19.

Retail sales may be down overall, but online retail sales in March rose 2.9% year-over-year and were up 8.8% for the first quarter of 2022. Industrial performance also rose, gaining 5% in March against a 4% growth expectation, as did capital investment in China, which rose 9.3% in the first quarter.

KraneShares offers two different funds with more targeted exposure to China’s online retail growth; the popular KraneShares CSI China Internet ETF (KWEB) provides exposure to some of the largest companies in the Chinese internet industry, and the KraneShares Emerging Markets Consumer Technology ETF (KEMQ) which focuses on the growth of Internet retailing and e-commerce in 26 emerging countries, including China.

For more news, insights and strategy, visit the China Insights channel.

Comments are closed.