China’s leaders have effectively acknowledged that the struggling economy will miss its official growth target of 5.5% this year and said on Thursday they would try to support consumer demand, but they would not. would stick to the strict tactics of fighting the COVID-19 virus which has disrupted industry and commerce.
The announcement after a Communist Party planning meeting reflects the high cost that President Xi Jinping’s government is willing to incur to halt the virus, in a politically sensitive year when it is expected to what Xi is trying to extend his term in power.
The party promised to “strive for the best results” in the second half. He did not address the growth target directly but dropped references to targets in previous statements, acknowledging that the economy will fall short after growing just 2.5% from previous year in the first semester.
“Policymakers have implicitly backtracked from the original growth target,” Larry Hu of the Macquarie Group said in a report. “That means they no longer consider 5.5%, or even 5%, to be achievable for this year. »
Party leaders vowed to “actively act to increase demand” and address the lack of consumer and business spending.
Retail sales, a key driver of growth, fell 0.7% from a year earlier in the first half, after plunging 11% in April following the temporary shutdown of Shanghai and a few other major cities to fight virus outbreaks.
Thursday’s statement affirmed support for the anti-COVID-19 strategy despite its growing economic cost and social disruption.
“We should resolutely and conscientiously implement the policies and measures for the prevention and control of COVID-19,” the statement said. “We should be doing a good job in tracking virus mutations and developing new vaccines and drugs. »
Forecasters don’t expect Beijing to ease virus controls until at least after the ruling party’s congress in October or November, when Xi is expected to try to break with tradition and grant himself a third five-term term. years at the head of the party.
China rebounded quickly from the 2020 pandemic, but activity weakened as the government tightened controls on the use of debt by its vast real estate sector, which supports millions of jobs. Economic growth fell due to a slump in construction and home sales.
Repeated shutdowns and uncertainty about the state of businesses have had a devastating effect on the entrepreneurs who generate new wealth and jobs in China. Small retailers and restaurants have closed. Others say they struggle to stay afloat.
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