China’s economic outlook was already challenging earlier this year as the effects of President Xi Jinping’s repression on property and other high – growth industries rippled through the world’s second largest economy.
But even before the National Statistics Bureau released its first-quarter GDP growth estimates on April 18, vision had deteriorated. Meanwhile, Xi’s management is struggling with the Govt-19 dream of capturing some of the country’s major cities last month.
Monday’s statistics release only a small sample of the upsurge that has erupted since the closure of China’s most populous city, Shanghai, and its most important financial and manufacturing hub, which did not turn into a full-blown crisis until the end of March.
Previously, large-scale disruptions had accumulated in the northern city of Xi’an, which saw an increase in cases in January, and more recently in Jilin Province, a major agricultural manufacturer and auto hub.
The knock-on effects of Shanghai Lockdown are far greater than those of Xi’an or Jilin, so no matter how bad the first quarter numbers come, they will only get worse in the coming months. Here are five things to look for when selecting yours:
How realistic is the government’s official annual growth target of 5.5 percent?
When Prime Minister Lee Hsien Loong announced a 5.5 percent target at the start of China’s annual parliamentary session on March 5, it struck most analysts aggressively, especially in light of his repeated assurances not to seek a “flood-like stimulus.” [national] The macro leverage ratio is generally stable “.
China’s economic output has expanded by 4 percent year-on-year in the last three months of 2021, from 4.9 percent in the previous quarter.
Deputy Prime Minister Liu Hee, Xi’s most trusted financial and economic adviser, has been instrumental in maintaining his reputation for maintaining discipline and preventing debt levels from exploding, as he did during the investment unleashed by Beijing after the 2008-09 global financial crisis.
But both Li and Liu are now clearly concerned about the health of the economy. Liu made a rare intervention in March to boost confidence in the economy and stock markets, which have been plagued by a combination of Govt locks and the inflationary effects of Russia’s invasion of Ukraine.
Will Trump address concerns about the zero-Govt political economy?
The success of China’s zero-govt approach to controlling the epidemic in 2020 and 2021 has become central to Xi’s political legacy, and justifies his third term as head of the party, government and military.
Xi has repeatedly said that local authorities should reach zero Govt, while ensuring minimal disruption to the economy and people’s lives. Shanghai initially tried to achieve this by locking up one half of its population for five days, followed by five days for the other half.
But the compromise approach has not been able to combat the contagion of the Omigron variant. With Shanghai’s daily case count exceeding 20,000, a practical city-wide lockout was followed without any clear exit strategy.
Other cities with the lowest daily number of cases are now seeking preemptive restrictions and total locks. Hernan Qi rated by Beijing consulting firm Cavegel Dragonomics Almost three-quarters Of China’s 100 major cities, more than half of the national GDP enforce Govt-related restrictions.
Except for Xi’s clear signal that zero-Govt zeal has gone too far, the economy will continue to bear the brunt of its consequences. On Wednesday, G reiterated that there would be no significant relaxation in policy.
How big of a success is consumption?
Lockdowns make it harder for people to go out and buy consumer goods, cars and flats, with predictable effects on the economy.
Car sales suffered before Shanghai announced its partial lockout on March 26, ending the month with a year-on-year decline of almost 12 percent. The chances of a rebound in April are not bright due to restrictions in major auto hubs such as Shanghai and Jilin.
Property sales also stagnated ahead of China’s March locks. Despite measures taken by local governments across the country to boost sales and the first cut in China’s benchmark mortgage lending rate since 2020, new home prices fell slightly in February compared to January.
Will the government seek covert stimulus measures to boost the economy?
Total social financing, a broad debt to the Chinese economy, rose 38 percent year-on-year in March to Rmb4.65tn ($ 730bn), up 8 percent from previous expectations.
This is a recurrence of March 2020, shortly after the outbreak in central China, when total social funding reached Rmb5.18tn.
Chinese banks also issued total Rmb3.1tn loans in March, 2.5 times higher than in February.
Is the patience of foreign investors approaching the break point?
This week, Jர்க்rg Woodke, president of the European Trade Union Confederation of China, warned that a series of explosions and harsh response from officials could “erode the confidence of foreign investors in the Chinese market.”
According to a recent study by German investors in China, half of respondents said their supply chains were “completely disrupted or severely affected”, while a third said their manufacturing operations were similarly affected.
“The Omigron variant presents new challenges that cannot be overcome by the old toolbox of mass testing and isolation,” Woodke said.