China pledges more economic support as lockdowns hamper growth | coronavirus pandemic

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The main decision-making body promises a package of measures to help industries and small businesses affected by the pandemic.

China will step up support for the economy as COVID-19 outbreaks and war in Ukraine threaten growth, the ruling Communist Party’s top policymaking body said on Friday.

China will roll out a package of measures to help pandemic-hit industries and small businesses, state media said, citing a Politburo meeting chaired by President Xi Jinping, as the country’s strict lockdowns weigh on the consumption and disrupt production.

“The COVID-19 and Ukraine crisis has led to increased risks and challenges. The complexity, severity and uncertainty of China’s economic development environment have increased,” the Politburo said.

“The stabilization of growth, employment and prices faces new challenges. It is very important to do a good job in the economic field and effectively protect and improve people’s livelihood.

Carlos Casanova, senior economist for Asia at UBP in Hong Kong, said the Chinese government was beginning to worry about the effect of the severe lockdowns on the economy.

“We expect the economy to contract in the months of March through April before stabilizing in June,” Casanova told Al Jazeera.

“Furthermore, it may take time before these measures translate into a pick-up in real activity as more people enter quarantine and infrastructure investment only drives growth with some lag. We cannot rule out the possibility of a moderate downgrade in the near term, especially due to earnings revisions, which do not yet take into account the impact these lockdowns will have on consumption. However, it is possible that we will see a more durable recovery in the second half, provided the authorities respect the rhetoric.

China’s benchmark jumped more than 2% after Friday’s Politburo meeting, with the technology-focused STAR50 index jumping more than 4%. Shares of Hong Kong-listed tech companies also rose, with the Hang Seng Tech index up more than 7%.

Market turmoil

Financial markets have been battered in recent weeks amid growing fears that China’s strict lockdowns will inflict severe damage on the economy and derail the global recovery just as the rest of the world recovers from the pandemic. pandemic.

Despite the mounting social and economic costs of Beijing’s controversial “dynamic zero COVID” policy, the Politburo said authorities would continue to aim to eliminate outbreaks while minimizing the economic fallout.

China will strive to keep economic growth within a reasonable range and meet social and economic goals for 2022, the Politburo said.

“We need to speed up policy implementation, implement tax refunds, tax and fee reductions and other policies, and make good use of all kinds of monetary policy tools,” he said. said the Politburo, adding that this would support the sustainable development of the real estate market and ensure the stable functioning of capital markets.

Beijing has set a target of around 5.5% growth for this year, a target that many economic analysts say is unlikely to be met.

Last week, the International Monetary Fund lowered its economic growth forecast for China in 2022 to 4.4%, from 4.8% in January.

Major financial institutions, including UBS, Bank of America, Barclays and Standard Chartered, have also downgraded their outlook in recent weeks.

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