China’s leaders effectively acknowledged that the struggling economy wouldn't hit its official 5.5 per cent growth target this year, and said on Thursday they would try to prop up sagging consumer demand but mostly stick to strict anti-Covid-19 tactics that disrupted manufacturing and trade.
The announcement after a Communist Party planning meeting reflected the high cost that President Xi Jinping’s government has been willing to incur to stop the virus in a politically-sensitive year, when Xi is widely expected to try and extend his term in power.
The party promised to “strive to achieve the best results” in the second half. It didn’t directly address the growth goal, but dropped references in earlier statements about targets, effectively acknowledging that the economy will fall short after growing just 2.5 per cent over a year ago, in the first half.
“Policymakers implicitly walked back from the original growth target,” said Larry Hu of Macquarie Group in a report.
“It means that they no longer view 5.5 per cent, or even 5 per cent, as achievable for this year.”
Party leaders promised to “actively act in expanding demand” and to make up for lack of consumer and business spending.
Retail sales, a major driver of growth, were off by 0.7 per cent from a year earlier in the first half, after plunging 11 per cent in April following the temporary shutdown of Shanghai and some other major cities to fight virus outbreaks.
Thursday’s statement affirmed support for the anti-Covid-19 strategy, despite its rising economic cost and social disruption.
“We should resolutely and conscientiously implement the policies and measures for the prevention and control of Covid-19… We should do a good job in tracking virus mutations and developing new vaccines and drugs," the statement said.
Forecasters don’t expect Beijing to ease anti-virus controls until at least after a ruling party congress in October or November, when Xi is expected to try to break with tradition and award himself a third five-year term as party leader.
China rebounded quickly from the pandemic in 2020, but activity weakened, as the government tightened controls on use of debt by its vast real estate industry, which supports millions of jobs. Economic growth slid due to a slump in construction and housing sales.
Repeated shutdowns and uncertainty about business conditions have devastated entrepreneurs who generate most of China’s new wealth and jobs. Small retailers and restaurants have closed. Others say they are struggling to stay afloat.
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