As ‘zero COVID’ bites, China’s leadership sounds alarm on economy

When Chinese Premier Li Keqiang called for a “sense of urgency” about growing economic risks during a meeting with provincial officials earlier this week, it was his third such warning in days.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

“We need to be highly vigilant for unexpected changes in the international and domestic situations, and downward economic pressure has further mounted,” China’s No 2 official told a symposium in Jiangxi province on Monday, according to a report in South China Morning Post, less than a week after drawing attention to the “complicated and evolving” global situation and COVID-19 outbreaks at home.

As China’s draconian “dynamic zero-COVID” pandemic restrictions and uncertainties including the war in Ukraine weigh on growth, Beijing appears increasingly concerned about the prospects for the world’s second-largest economy.

The uncertain outlook casts doubt on the ruling Chinese Communist Party’s ability to reach its target of 5.5 percent economic growth in 2022, even as state media insist the ambitious goal remains within reach, adding to mounting risks for the global economy that include war in Europe, soaring energy prices and upcoming interest rate increases in the United States.

If COVID-19 cannot be quickly brought under control – which seems increasingly unlikely – then either Beijing’s zero-tolerance pandemic strategy or the growth target will have to go, said Carsten Holz, an expert on the Chinese economy and professor at the Hong Kong University of Science and Technology (HKUST).

“In the face of lockdowns, the old channel from state-directed credit to state-directed investment or production becomes inoperative,” Holz told Al Jazeera. “A relatively lockdown-free rural sector cannot save the real GDP growth rate: Agriculture’s share of GDP is only eight percent.

“Industry, the largest sector in GDP, cannot, either, as long as there are lockdowns, nor can the travel and hospitality industries,” Holz said.

Among China’s top 100 cities by GDP, all but 13 are under some level of pandemic restrictions, with the intensity of those controls on the rise, according to a recent analysis by global investment research firm Gavekal.

In Shanghai, a strict lockdown has forced manufacturers such as Tesla and fellow carmaker Nio to suspend production and delay shipments at the city’s port, the largest of its kind worldwide, while sparking rare displays of civil unrest among the metropolis’s 26 million residents.

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