Headwinds remain on China's GDP

China's official 8.1 percent GDP growth rate for 2021 was appealing and statistically higher than expected - but not without headwinds ahead.

The general consensus is that, between now and the 20th National Party Congress in October this year, it is important for China to maintain an economic growth of at least 5 percent as President Xi Jinping is expected to seek a third term at the congress.

It was not only politically correct to manage to pull economic growth to above 8 percent, it also set an assuring tone to conclude the year 2021 in wake of periodic and localized lockdowns in the mainland during the year.

Could it be tougher to achieve the target in 2022?

Unless Beijing also brings its strict pandemic policy of zero tolerance up to date in light of the global pandemic trend as it introduces new economic policies to stimulate the economy, it could be "half the result for twice the effort."

The number of 8.1 percent was wonderful yet, if studied quarterly, riddled with concerns.

In the first quarter, economic activities rebound by over 18 percent. Then in the second quarter, the growth was more than halved to 7.9 percent. The falling trend continued for the rest of the year, with 4.9 percent in the third quarter and 4 percent in the fourth.

Except for exports that expanded almost 30 percent in 2021, investments and consumer spending grew only 4.9 percent and 12.5 percent. In December alone, consumer spending increased only 1.7 percent, the lowest in 16 months.

It's evident in the quarterly figures that, though still growing, the economy has decelerated from the strong start at the start of the year.

Looking ahead, there are headwinds to brace against.

At the end of 2021, the Economic Work Conference cited three major hurdles to overcome - demand contraction, supply shock and weak expectations - as it made a judgment on the latest situation.

Stronger than expected exports were mainly due to supply chains outside China being disrupted by periodic waves of new variants. As economic activities heated up overseas, buyers had to look to China for supplies.

This might change when the pandemic stabilizes to become endemic in Asia. Conflicts between China and the West may force buyers to look elsewhere for future supplies. Periodic lockdowns pursued by the current Chinese pandemic policy would offer little help.

Last year was also marked by a rigorous crackdown on major economic sectors in the name of regulation, from property developers and internet giants to private education providers and entertainment icons.

As a result, real estate developers big and small were trapped in a debt crisis threatening their associated supply chains too.

The regulatory crackdown deepened market uncertainty for new investments and sank consumer expectations as companies trapped in the movement had to lay off workers.

Policymakers are aware of the growing risks. People's Bank of China's recent move to lower the reserve requirement ratio for banks could be the beginning of more monetary measures to increase liquidity to stimulate the economy.

However, unless the economy grows in pace in parallel, stagflation may surface.