Covid Lockdowns Threaten China’s Economic Growth

Web Desk — China pays the price of its zero-COVID policy.

Economic experts say China’s zero-COVID policy is threatening to derail Beijing’s ambitious GDP growth target as supply chains are snarled, ports are facing delays, and Shanghai is still under lockdown.

China’s economic growth was already slowing in the second half of last year due to a property market slump and regulatory crackdowns, prompting policymakers to set their lowest annual GDP target in decades for 2022.

Analysts warn that the figure of 5.5 percent would be difficult to achieve with stay-at-home orders halting production and stunting consumer spending in key cities. They expect a figure of 4.3pc for the first quarter, just above the 4.0pc recorded in the three months prior.

“China’s economy saw a good start in January and February with less energy constraints, domestic demand recovery… fiscal stimulus, and resilient exports,” said Gene Ma, head of China research at the Institute of International Finance.

But surging virus cases in March and lockdowns have “severely disrupted supply chains and industrial activities”, he added.

Analysts fear the Coronavirus outbreak would reverse the gains made earlier in the year.

As a result of a lockdown in business hub Shanghai, carmakers have warned of severe disruptions to supply chains and possibly even halting production.

Li Keqiang said this week that state support should be stepped up, and banks’ reserve requirements could be cut to help virus-hit sectors.

In March, Shenzhen, a southern tech powerhouse, went into full lockdown for almost a week due to Covid outbreaks. “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,” Goldman Sachs said in a recent report.