Investment Institute
Monthly Market Update

Monthly update on Asia & China Market: How to turn the economy around?

  • 26 April 2022 (5 min read)

In this video, our Senior Emerging Asia Economist Aidan Yao discusses three questions:

  • What is happening in the China economy?
  • What needs to be done to turn the economy around?
  • What is our outlook on China’s growth?

Full transcript:

Hello, welcome to our monthly video. My name is Aidan Yao. I’m the senior emerging Asia economist at AXA IM.

The Chinese economy is in a precarious position, plagued by a vicious COVID flare-up and elevated external uncertainties. Accelerated equity market selling and RMB depreciation, on the back of capital outflows, suggest that global investors are getting worried about the economy amidst the worst outbreak since the start of the pandemic.

What is happening in the economy?

Sequential growth slowed notably in March, with retail sales and services activity contracting for the first time since Q1-2020. And this is before Shanghai’s lockdown went into full swing, sending shock waves across the nation’s logistics and supply chains. With nearly a quarter of the economy now under various degrees of COVID controls, the economic outlook is growing bleaker by the day.

What needs to be done to turn the economy around?

Drastic actions are, therefore, needed to pull the economy back from a cliff. We think Beijing needs to urgently undertake two sets of policy changes.

First, the COVID management has to move away from a heavy reliance on draconian administrative controls to one that puts more emphasis on vaccines, self-testing, home quarantine, and treating for the vulnerable. It won’t be a full liberalisation straightaway due to public-health and political considerations, but a middle-of-the-road approach – between ‘zero COIVD’ and ‘living with COVID’ – to better balance virus control and growth stabilisation. These changes can take place even with the overall name of strategy ‘the dynamic Zero COVID’ staying the same. 

Second, besides relaxing COVID restrictions, macro policy supports need to step up to more effectively stimulate the economy. Policy easing has quickened in recent weeks, but still fall far short of what’s required to counter the stiffened growth headwinds. Hence, more policy supports, and implemented in better coordination with COVID policy changes, are needed to revive the economy once the current outbreak is brought under control.

What is our outlook on China’s growth?

To reflect the greater COVID shock and the underwhelming policy actions so far, we have lowered our 2022’s growth forecast to 4.5% from 5%. Importantly, the revised projection imbeds the urgent policy adjustments as described above. Failure to achieve them could see economic growth fall further towards, or even below, 4% this year.

Thank you very much and stay safe.


    This website is published by AXA Investment Managers Asia Limited (“AXA IM HK”), an entity licensed by the Securities and Futures Commission of Hong Kong (“SFC”), for general circulation and informational purposes only. It does not constitute investment research or financial analysis relating to transactions in financial instruments, nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy, sell or enter into any transactions in respect of any investments, products or services, and should not be considered as solicitation or investment, legal, tax or any other advice, a recommendation for an investment strategy or a personalised recommendation to buy or sell securities under any applicable law or regulation. It has been prepared without taking into account the specific personal circumstances, investment objectives, financial situation, investment knowledge or particular needs of any particular person and may be subject to change at any time without notice. Offering may be made only on the basis of the information disclosed in the relevant offering documents. Please consult independent financial or other professional advisers if you are unsure about any information contained herein.

    Due to its simplification, this publication is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee such opinions, estimates and forecasts made will come to pass. Actual results of operations and achievements may differ materially. Data, figures, declarations, analysis, predictions and other information in this publication is provided based on our state of knowledge at the time of creation of this publication. Information herein may be obtained from sources believed to be reliable. AXA IM HK has reasonable belief that such information is accurate, complete and up-to-date. To the maximum extent permitted by law, AXA IM HK, its affiliates, directors, officers or employees take no responsibility for the data provided by third party, including the accuracy of such data. This material does not contain sufficient information to support an investment decision. References to companies (if any) are for illustrative purposes only and should not be viewed as investment recommendations or solicitations.

    All investment involves risk, including the loss of capital. The value of investments and the income from them can fluctuate and that past performance is no guarantee of future returns, investors may not get back the amount originally invested. Investors should not make any investment decision based on this material alone. 

    Some of the services listed on this Website may not be available for offer to retail investors.

    This Website has not been reviewed by the SFC. © 2022 AXA Investment Managers. All rights reserved.