China unlikely to achieve GDP targets as Covid-19 crisis worsens

China's Zero-COVID policy and its highhandedness in handling the COVID crisis is causing hiccups in supply chains, delays at ports and lockdown in Shanghai which in turn is posing a grave threat to the country's economy especially when it comes to Beijing's GDP targets.

China, the world's second-largest economy, was already witnessing a slump in the latter half of last year and is again the growth again seems to be bleak.

With a property market slump and regulatory crackdowns last year the policymakers set the lowest annual GDP target for China in decades for 2022, reported Dawn.

According to the analysts speaking to a French-based media, the set figure of 5.5 pc would be hard to achieve with stay-at-home and strict lockdowns orders halting production and stunting consumer spending in key cities.

 

Experts from 12 financial institutions polled a French-based media forecast a GDP growth of 5.0 pc 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, as per the media outlet.

The official data for the first quarter will be published on Monday. Gene Ma, head of China research at the Institute of International Finance said, "China's economy saw a good start in January and February with fewer energy constraints, domestic demand recovery... fiscal stimulus, and resilient exports."

The rising COVID cases in March and the restrictions by the Chinese authorities have, "severely disrupted supply chains and industrial activities." Whatsoever gains were made early in the year are set to be reversed, as per the analysts.

With many sectors facing the brunt of China's COVID measures, carmakers this week warned of severe disruption to supply chains and possibly even halting production completely if a lockdown in business hub Shanghai continues.

State Council of the People's Republic of China's Premier Li Keqiang said that there the support from the state authorities should be stepped up. He noted that tools including cuts to the reserve requirement ratio for banks could be tapped to help virus-hit sectors, reported local media.

It is not just Shanghai's economy which is in the clutches of China's strict COVID norms, but also major cities like southern tech powerhouse Shenzhen. Shenzhen went into complete lockdown for almost a week in March.

Goldman Sachs in its recently published report said, "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.