RIO DE JANEIRO, BRAZIL – The zero-covid strategy is doing enormous damage to the Chinese economy. Now the communist leadership in Beijing is trying to save what can still be saved – but still does not want to deviate from the previous hard lockdown policy.
Premier Li Keqiang’s honest assessment of the stress China’s economy is facing, and his rare warning of a possible contraction in the second quarter after two months of zero interest rate policy, show that Beijing is stepping up its efforts to stabilize the economy.
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Li’s videoconference with more than 100,000 government cadres on Wednesday also reinforced the pressure Beijing is putting on local authorities to prevent the Chinese economy from collapsing.
Earlier this week, the State Council, China’s cabinet, unveiled a package of 33 measures to support the economy, including speeding up infrastructure projects and extending loans to businesses, increasing tax breaks and rebates, boosting car sales, and other support measures by the end of the month, according to the South China Morning Post.
However, it is questionable whether these measures will be enough to offset the damage caused by the zero-covid policy and extremely tough loose lockdowns.
For the first time, Li acknowledged that China may miss the economic growth target of “around 5.5%” set by Beijing earlier this year. It’s a euphemistic statement, especially since international experts have repeatedly pointed out that the official figures are grossly inflated.
“Embellishments” by party cadres at the local and regional levels add up all the way to the top. This is because they want to deliver good figures in order to be praised by the party leadership and not lose their lucrative posts.
ZERO-COVID POLICY
Still, the prime minister signaled no change in the zero-covid policy that has sealed off Shanghai – a commercial center of 25 million people – and economically important cities in the Yangtze River Delta.
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It has also sparked an outcry among foreign investors, local entrepreneurs, and ordinary people. “Development is the foundation and key to solving all problems in China. It also supports pandemic control, the labor market, people’s lives, and risk reduction,” Li, the country’s No. 2, said, according to a transcript of his speech confirmed by officials attending the meeting.
If the Chinese economy does slip into recession because of the harsh lockdowns, it also poses a risk to the already stumbling global economy.
After all, the People’s Republic is now the world’s largest economy in terms of purchasing power parity, and it also ranks second behind the United States in absolute terms. An economic collapse in China could trigger a new global economic crisis.