Xi Jinping reaffirms growth target that analysts say is out of reach
Chinese President Xi Jinping pledged to meet economic targets for the year even as the government’s zero-tolerance approach to tackling Covid outbreaks and a weak housing market put the growth target still further more out of reach.
In a keynote speech at a virtual BRICS business forum on Wednesday, Xi said China will “strengthen macro-policy adjustment and adopt more effective measures to strive to achieve social development goals. and economic for 2022 and minimize the impacts of Covid-19”. according to a Xinhua report.
It was the first reference to targets since a Politburo meeting in April, with most economists expecting Beijing to miss its gross domestic product growth target of around 5.5% this year. In the latest Bloomberg survey, economists cut their full-year growth projections by 40 basis points to 4.1% and predicted a contraction in GDP in the second quarter from the previous three months.
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Xi said China’s approach to fighting COVID-19 has not only protected people’s lives and health, but also stabilized the fundamentals of economic and social development as much as possible, according to the report.
“This is the first comment from senior policymakers on ‘striving to meet full-year economic targets’ in recent months,” Goldman Sachs Group Inc. economists, including Maggie Wei, wrote in a note. . “While the recovery in growth appears to have accelerated in June, barring further radical easing, we believe that the GDP growth target of around 5.5% remains extremely challenging this year. “
China’s CSI 300 stock index rose 0.7% on Thursday morning, outpacing regional stocks. The index is up more than 13% from its April low and is among the best-performing indicators in the world over the period, with investors taking into account the continued stimulus from mainland authorities, as well as the lifting of lockdowns in key cities.
Covid shutdowns since March in places like the technology hub of Shenzhen, the auto manufacturing hub of Jilin and the financial metropolis of Shanghai have disrupted business and consumer activity and blocked supply chains. Although the worst restrictions have been eased and production has resumed, recovery is likely to be slow as authorities remain vigilant in tackling outbreaks.
The median estimate from a Bloomberg survey of economists is that GDP will shrink 1.5% in the second quarter from the previous three months, down from the previous estimate of 0%. For the full year, about a third of respondents expect growth of less than 4%.
Xi’s remarks “could mean there is still a possibility” for China to hit the full-year target of around 5.5%, Qin Han, chief bond analyst at Guotai Junan, said Thursday. Securities Co., in a note.
China will need growth above 7% in the second half of the year to meet the target, assuming the economy expands by around 2% in the second quarter, he said. Economists polled by Bloomberg expect GDP to grow only 1.5% in the second quarter on an annual basis.
During his speech, Xi called on other countries to “strengthen macroeconomic policy coordination to prevent the global recovery from slowing down or even stalling.” He cited global supply chain disruptions, high inflation and turmoil in international financial markets as major threats.
He also criticized the sanctions for stoking economic disruption, but did not name the United States, and said that “politicizing” and “militarizing” the global economy “using a dominant position in the global financial system to impose sanctions wantonly would only harm others as well as hurt themselves, leaving people all over the world to suffer.
Xi also chaired a separate meeting on Wednesday in which China endorsed a plan to promote “healthy” development of the payment and fintech sectors, the latest sign that a broad tech crackdown may be easing. . The plan, which has supported stronger regulation of major payment platforms, aims to enable businesses to play a greater role in serving the real economy while working to prevent and defuse systemic financial risks.
Support for pledges
The speech and Xi-led meeting added to pledges this week from Chinese leaders to support the Covid-battered economy.
At a regular meeting of the State Council on Wednesday, Premier Li Keqiang urged authorities to roll out as many policies as possible to boost consumption, saying this is an important driver for restoring the economy back on track. He announced a series of measures, including the possible extension of the tax exemption on purchases of new energy cars and the promotion of the used car market. The move is expected to boost China’s automobile and related consumption by about 200 billion yuan ($30 billion), according to a Xinhua statement.
Similarly, Finance Minister Liu Kun said on Tuesday authorities were exploring new policy tools to support the economy. The government will further accelerate budget spending as well as the sale of special local government bonds, he said. Special local bonds are mainly used to finance infrastructure investments.