What’s ahead for China’s financial markets in 2022?

What’s ahead for China’s financial markets in 2022?

The Central Economic Work Conference held towards the end of last year provided a plan for 2022 to “stabilise the economy” by ensuring fiscal spending intensity, accelerating spending progress and carrying out infrastructure investment ahead of schedule.To get more china business market news, you can visit shine news official website.

China’s GDP grew by 8.1 percent in 2021, but the second half of the year saw continued economic weakness, with GDP growth falling to 4.9 percent and 4 percent year-on-year in the third and fourth quarters. The risk created by the spread of local COVID-19 cases and the continued exposure of real estate company added uncertainty to the fundamentals.

The People’s Bank of China’s (PBOC) medium-term lending facility (MLF) and open market reverse repo operations conducted on 17 January both saw their rates fall by 10 basis points, breaking the trend of unchanged rates since April 2020.

In addition, on 20 January, the 1-year and 5-year loan prime rates (LPR) were also lowered by 10 basis points and 5 basis points, respectively. The pace of regulation of the PBOC has changed to become more aggressive and proactive.The PBOC’s easing policy at the beginning of the year has not only maintained reasonable liquidity in the banking system, but also allowed it to match spending in infrastructure construction, while increasing investment in areas such as pollution reduction and new energy. This not only expands short-term demand but also enhances long-term momentum and boosts social consumption.

The World Bank lowered its projection of China’s GDP growth rate to 5.1 percent in 2022 from 5.4 percent six months earlier in January. China’s benign inflation environment creates room for further monetary policy easing, despite the continued and increasing downward pressure on the economy.

China’s economic growth rate in 2022 is expected to “start low and end high,” with an expected growth rate of 5.2 percent for the year, according to estimates from about 60 institutions in the latest quarterly survey by Reuters.The Central Economic Work Conference clarified and corrected five long-term priorities in relation to common prosperity, capital, supply security of primary products, prevention and resolution of risks, and double carbon goals. It also clarified its policy guidance.

The Conference proposed a “traffic light” system for capital, as a clear policy signal that beneficial capital shall be promoted while harmful capital shall be eliminated, with equal emphasis on the promotion of capital development and legal regulation.

The internet platform economy, online celebrity live streaming, and education and training, which have created countless wealthy people in the last decade through monetisation of traffic, will give way to “hard and core technology” innovation, such as new energy, autonomous driving and chip manufacturing under the new era theme of common prosperity.The Greater Bay Area (GBA) and its development will enable the manufacturing and financial sectors to collaborate more seamlessly.

Together with the added advantages of cross-border connections, talent supply, and regulatory support, it will gradually become an international hub for China.

The GBA “Cross-boundary Wealth Management Connect” (WMC) was officially launched in September 2021, enabling eligible residents to invest in RMB-denominated financial products issued by banks in Hong Kong and Macao, and vice versa.

After just a few months in 2021, the total number of participating individual investors was approximately 22,000, investing a total of RMB486 million. Hong Kong and Macau investors accounted for 65 percent of the total invested.

State-owned banks dominated in handling cross-border WMC business, accounting for more than half of the funds transferred. Joint-stock banks came in second (36.53 percent), followed by foreign banks (9.19 percent).

Under the northbound WMC scheme, individual investors in Hong Kong and Macau preferred wealth management products as well as fund products, while mainland individual investors under the southbound scheme were more cautious.