In the second half of 2021, especially in the fourth quarter, China’s economy will face “triple pressures” : demand contraction, supply shock, weakening expectations, and increasing pressure on steady growth. In the fourth quarter, GDP growth fell to 4.1%, beating previous estimates.

The sharp-than-expected slowdown has prompted a new round of stimulus from policymakers to stabilise growth. One important aspect is to concentrate on approving fixed asset investment projects, appropriately advance infrastructure construction, and stabilize real estate market expectations. In order to form the construction workload as soon as possible, relevant departments also implemented more loose monetary policy, lowered the reserve requirement ratio several times, and cut real estate loan interest rates ahead of others. Data from the People’s Bank of China showed that yuan-denominated loans increased by 3.98 trillion yuan in January and social financing increased by 6.17 trillion yuan in January, both hitting record highs. Liquidity is expected to remain loose going forward. In the first quarter or the first half of this year, financial institutions are likely to cut the reserve requirement ratio again, or even interest rates. At the same time that monetary policy is proactive, fiscal policy is also more proactive. The latest data from the Ministry of Finance revealed that 1.788 trillion yuan of new local government bonds have been issued ahead of schedule for 2022. The relatively sufficient fund supply is bound to drive a rebound in the growth rate of fixed asset investment, especially infrastructure investment, in the first quarter. It is believed that under the background of stabilizing growth policies, the growth rate of infrastructure investment is expected to pick up gradually in the first quarter of 2022, and real estate investment may also stabilize at a low level.

While domestic demand has received policy support, foreign trade exports are expected to continue to generate a lot of help this year. It should be said that exports have always been an important part of China’s total demand. Due to the epidemic and the extreme issuance of liquidity before, overseas demand is still strong. For example, the low interest rate policy in Europe and the United States and the home-based office policy lead to the hot real estate market and the acceleration of new house construction. Statistics show that the export performance of excavators in January is bright, weakening the impact of the decline in the domestic market. In January, the export of excavators increased by 105% year-on-year, continuing the trend of rapid growth and achieving positive year-on-year growth for 55 consecutive months since July 2017. Notably, overseas sales accounted for 46.93 percent of total sales in January, the highest proportion since statistics began.

Exports should look good this year, as evidenced by the rise in sea freight prices in January. Container rates on major international routes rose another 10 percent in January from a year earlier and quadrupled from the previous two years. The capacity of major ports is strained, and there is a huge backlog of goods waiting to come in and go out. New shipbuilding orders in China rose sharply in January from a year earlier, with orders and completions breaking monthly records and shipbuilders operating at full capacity. Global orders for new ships rose 72 per cent in January from the previous month, with China leading the world with 48 per cent. As of the beginning of February, China’s shipbuilding industry held orders of 96.85 million tons, accounting for 47 percent of the global market share.

It is expected that under the policy support of steady growth, the domestic economic momentum is expected to increase significantly, which will form a certain driving role for the domestic steel demand, but there will be some adjustment in the demand structure.