With the widespread transmission of Covid-19 in China, the communist government has stepped up severe lockdowns and mass testing in a number of regions, saying such actions are necessary to protect people.
However, China’s draconian zero Covid policy is wreaking havoc on its economy, directly threatening the country’s long-term development. Chinese officials are now trying to revitalize its economy.
On May 25, Chinese Premier Li Keqiang, the country’s second most influential leader after President Xi Jinping, convened an unprecedented meeting with more than 100,000 attendees, during which senior officials recommended further measures. to stabilize an economy hammered by the country’s tough policies, according to state media.
The unexpected State Council video conference was joined by officials from all levels of government, including provincial, municipal and other senior officials.
.@CNNBusiness: China’s cabinet held an emergency meeting with more than 100,000 attendees, according to state media, as top leaders called for new measures to stabilize an economy battered by tough Covid-19 restrictions. @jessieyeung8 has the details. https://t.co/YLlnvVWSXm
— CNN Asia-Pacific PR (@cnnasiapr) May 26, 2022
Pointing to unexpected events such as the ongoing coronavirus outbreaks and the conflict in Ukraine, Li said his top priority was to ensure the economy grew in the second quarter.
“This target is not high, and it is much worse than the 5.5% growth target we proposed at the start of the year,” he said, referring to the target. GDP growth for 2022. “But it’s based on reality and that’s what we have to do,” he added.
Many international institutions have cut their forecasts for China’s development, Li said, with UBS lowering its projection to 3% this year.
“We cannot accept this,” he said, pointing out that in the past 40 years the economy has only slowed down once, in 1990.
His statements highlight the problem China faces in balancing economic growth with the political ambitions of Xi Jinping, the country’s top leader.
Li was reportedly ignored for much of his term, despite being the country’s No. 2. He is generally responsible for driving the economy. However, in recent months Li has come to the fore in advocating economic reforms.
Is containment responsible for the economic slowdown?
Beijing is trying to control perhaps the worst outbreak since the start of the pandemic, as the more transmissible omicron variant continues to evade stringent quarantine precautions.
Botched lockdown measures in Shanghai, China’s financial capital and most populous metropolis, have shattered popular faith in the zero covid policy. Covid limitations still affect 350,000 people in the city.
According to a recent survey conducted by the American Chamber of Commerce in China, more than half of American companies have postponed or reduced their investments in China due to the recent epidemics.
Additionally, half of respondents say overseas talent is also much less likely to migrate to China due to covid rules.
The most concerning aspect of China’s economic assessment in April is a record high youth unemployment rate. In April, nearly one in all five people aged 16 to 24 were unemployed. The unemployment rate for people aged 25 to 59 rose to 5.3%, its highest level since June 2020.
real estate, which represents a quarter China’s $18 trillion economy, which has been a major driver of development over the past two decades, is in turmoil due to rising corporate debt and sluggish real estate demand .
Another essential component of the Chinese economy, the technology sector is also in difficulty. Alibaba, Tencent and JD.com posted the weakest sales growth in the last quarter and announced massive layoffs.
New economic measures
The teleconference follows an executive meeting of the Council of State on May 23, during which officials disclosed 33 new economic initiatives. These measures include increasing tax refunds, providing loans to small businesses and providing emergency loans to the aviation industry.
Some of these regulations also reduce Covid limitations, such as lifting bans on vehicles traveling from low-risk areas. Li encouraged government agencies to adopt the 33 measures at the meeting by the end of May.
The new measures are expected to phase out a total of 60 billion yuan of purchase tax on certain passenger cars. The policies also heralded an easing of housing restrictions, encouraging cities to develop their own housing policies to encourage home buying.
According to Chinese experts, these policies are mainly suited to the current complicated economic situation, with strong political intensity and a wide range of political support covering both supply and demand.