While Beijing has set an ambitious growth target this year with a generous fiscal stimulus plan, new COVID-19 waves are adding to mounting headwinds amid a slowing global economy.
Much of the global economy has transitioned quickly from an early-cycle recovery to a mid-cycle expansion that now appears to be rapidly progressing toward late-cycle dynamics.
While the recent energy crisis has disrupted China’s economy, we do not expect a significant drag on growth.
Global demand for consumer goods has rebounded since the second half of 2020, driven initially by large government stimulus packages and, more recently, by resilient capital expenditures and swift vaccination rollouts in most developed markets.
In late 2020, China launched an anti-trust campaign focused mainly on big technology firms, aiming to crack down on what the government views as monopolistic practices.
China’s economy should see a soft landing as stimulus is reduced, but the drag on global growth may place a burden on developed economies to keep stimulus taps open for longer.
It will continue to be important to be an active investor during this period of transition and to carefully monitor the impact of policy on credit sectors.
Policy will continue to be carefully calibrated as China walks a tightrope between supporting growth and maintaining financial stability.