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China’s economic growth under threat as virus takes hold

China’s economic growth under threat as virus takes hold

BEIJING: The mounting cost of China’s zero-Covid policy threatens to derail Beijing’s ambitious GDP target, analysts say, as supply chains snarl, ports face delays and Shanghai remains mired in lockdown.

Growth in the world’s second-largest economy was already slowing in the latter half of last year with a property market slump and regulatory crackdowns, leading policymakers to set their lowest annual GDP target in decades for 2022.

But analysts told AFP the figure of 5.5 per cent would be tough to achieve with stay-at-home orders halting production and stunting consumer spending in key cities.

Experts from 12 financial institutions polled by AFP forecast GDP growth of 5.0pc for the full year.

They expect a figure of 4.3pc for the first quarter, just above the 4.0pc recorded in the three months prior.

Official first-quarter data will be published Monday.

“China’s economy saw a good start in January and February with less energy constraints, domestic de­­mand recovery... fiscal stimulus, and resilient exports,” said Gene Ma, head of China research at the Institute of International Finance.

But surging virus cases in March and lockdowns have “severely disrupted supply chains and industrial activities”, he added.

The analysts predicted the coronavirus outbreak would reverse the gains made earlier in the year.

Carmakers this week warned of severe disruption to supply chains and possibly even halting production completely if a lockdown in business hub Shanghai continues.

Premier Li Keqiang said this week that state support should be stepped up and tools including cuts to the reserve requirement ratio for banks could be tapped to help virus-hit sectors.

Other major cities struck by Covid outbreaks include southern tech powerhouse Shenzhen, which went into full lockdown for almost a week in March. “The hit to retail sales could be even bigger, as dining-out services — around 10pc of retail sales — were temporarily suspended in a few provinces,” Goldman Sachs said in a recent report.

Published in Dawn, April 17th, 2022

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