It is the first time since 1976, the year Chairman Mao died, that Britain has expanded faster than the Asian titan.
China was the first major economy to rebound to pre-Covid GDP, but Beijing’s iron zero-covid policy is now expected to hold the country back as the country’s factories and ports routinely shut down due to new outbreaks.
A crisis in the real estate market surrounding the ailing property developer Evergrande will also eliminate an important growth driver.
Meanwhile, enforced restrictions on energy-intensive aluminum smelters designed to conserve scarce energy resources have adversely affected production, which the investment bank is expected to continue or intensify.
Such low growth will put pressure on China’s leadership, warns BNP Paribas, especially in light of the crucial 20th century.
The bank said, “We expect policies to bring reported GDP growth to over 5 percent for the next year. Without it, any continued slowdown in momentum and real estate investment concerns would run the risk of keeping organic growth well below policymakers’ thresholds.
“We assume that the political pressure for healthy and stable growth is imminent and will intensify before the 20th party congress in late autumn 2022.”
These measures to boost growth could include relaxing credit and credit standards, more funding for infrastructure and manufacturing, and possibly easing the zero-covid rules to boost consumer spending.
In the meantime, the UK will see a “relatively robust recovery” through 2022 as it “still has some catching up to do” despite the impact of shortages and rising energy prices.
BNP said: “Strong employment and investment intentions suggest underlying demand will remain strong.”
It forecast that scarring – the long-term impact on GDP compared to pre-Covid projections – will be around 1 percent, half what the Bureau of Budgetary Responsibility forecast, suggesting there is more room for recovery .
Analysts said, “Excess household savings remain plentiful and the budget has been more generous than we expected in the short term.”