BEIJING: Rising cost of China’s zero-Covid policy threatens to derail Beijing’s ambitious gross domestic product (GDP) target, analysts say as supply chains rumble, ports face delays and Shanghai remains under lockdown.
Growth in the world’s second-largest economy was already slowing in the second half of last year with a housing market slump and regulatory clampdowns, leading policymakers to set their lowest annual GDP target in decades for 2022.
But analysts told Agence France-Presse (AFP) that the 5.5% figure set would be difficult to achieve, with stay-at-home orders halting production and dampening consumer spending in key cities.
Experts from 12 financial institutions interviewed by AFP predict GDP growth of 5.0% for the full year.
They expect 4.3% for the first quarter, just above the 4% recorded in the previous three months.
Official data for the first quarter will be released on Monday.
“China’s economy got off to a good start in January and February with fewer energy constraints, a recovery in domestic demand…fiscal stimulus and resilient exports,” said Gene Ma, head of research at China at the Institute of International Finance.
But the spike in coronavirus cases in March and the shutdowns have “severely disrupted supply chains and industrial operations”, he added.
Analysts predicted the latest coronavirus outbreak would undo gains made earlier in the year.
Automakers warned this week of severe disruptions to supply chains and possibly even a complete halt to production if the lockdown in Shanghai, the country’s economic hub, continues.
Chinese Premier Li Keqiang said this week that state support should be stepped up and that tools, including cuts in the reserve requirement ratio for banks, could be leveraged to help sectors hit by the virus.
Other major cities hit by Covid outbreaks include the southern tech powerhouse of Shenzhen, which went into total lockdown for nearly a week in March.
“The hit to retail sales could be even bigger as foodservices – around 10% of retail sales – have been…suspended in a few provinces,” Goldman Sachs said in a recent report.
But economists expect bigger consequences from the lockdowns to show up in April data and slow growth.
With infections found in dozens of cities, Beijing has clung to the zero-Covid approach, which involves weeding out clusters as they emerge while carrying out mass testing and isolating positive cases.
This has led to strict movement restrictions in Shanghai for around two weeks now, as the financial hub registers tens of thousands of cases daily, most of them asymptomatic.
The city is home to the world’s busiest container port, and while operations unfold, intercity travel restrictions and a shortage of truck drivers have hampered the passage of goods.
The daily flow of freight vehicles on highways has “sharply declined” since the beginning of April, said Julian Evans-Pritchard, Capital Economics’ senior China economist, in a recent report.