China’s rulers sidestepped the issue of GDP growth for the rest of the year in their latest statement of intent to say they would focus on “employment, prices and results”.
State media, following a high-level meeting of the ruling Communist Party, said China should “stabilize employment and prices, keep economic operations within a reasonable range and strive to achieve the best possible results” for the second half of 2022.
Xinhua News Agency was reporting on a meeting of the 25-member Politburo chaired by President Xi Jinping that had convened to assess the economy.
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The world’s second-largest economy avoided contraction in the second quarter due to widespread Covid-19 lockdowns. Analysts said Beijing’s full-year growth target of around 5.5 percent looked increasingly unattainable. China missed the last growth target in 2015.
First-half gross domestic product grew by just 2.5% from a year earlier, pointing to heavy pressure in the second half amid fears of a global recession, uncertainties from the war ‘Ukraine and concerns over recurring Covid lockdowns.
After a Politburo meeting in April, state media reported that China will “work hard to achieve annual economic and social development goals.”
On June 22, Xi, at the opening of a BRICS Forum, he said China would take further steps to meet its annual economic targets while minimizing the impact of its Covid-19 prevention and control measures as much as possible.
But during an inspection tour of the central city of Wuhan on June 28, Xi said China will “strive to achieve a relatively good level of economic development this year.”
Similarly, last week Premier Li Keqiang told the World Economic Forum that China “will strive to achieve relatively good results in economic development throughout the year.”
Congress of the Communist Party of China
Xinhua said on Thursday that major provinces must take the lead in growing China’s economy.
“The upshot is that the Politburo meeting reinforces our view that stimulus will remain relatively contained this year and that the economy will continue to perform well below potential over the coming quarters,” said Julian Evans-Pritchard, senior economist from China Economy of capital.
Full-year GDP growth is expected to reach 4.0 percent, according to a Reuters poll of economists this month.
To stabilize the economy, the authorities have deepened tax credit cuts, accelerated the issuance of special local government bonds to boost infrastructure investment and reduced taxes on car purchases.
The economic pressures coincide with a once-every-five-year Communist Party Congress this fall, where Xi is expected to secure an unprecedented third term as leader.
While much of the rest of the world has been trying to live with the virus, Xinhua reported after the Politburo meeting that China would adhere to the “zero-Covid dynamic” policy.
“Persistence is victory,” Xinhua said.
China’s struggling real estate sector
With China’s housing market reeling from one crisis to another, developers strapped for liquidity and debt-laden and buyers launching mortgage boycotts across the country, the country’s top leaders vowed to stabilize the real estate and financial sectors .
Local governments must ensure the delivery of real estate projects, properly resolve the risks of some rural banks and crack down on financial crimes, Xinhua reported.
The real estate market poses big risks to China’s economy on a systematic basis, said Liu Ligang, head of Asia-Pacific economic analysis at Citi Global Wealth Management.
“The Politburo asked local governments to guarantee the delivery of housing, but if major real estate developers generally default, I’m afraid it’s not a problem that local governments can solve,” Liu said.
“It may become a national problem that will seriously affect the country’s financial system.”
Reuters with additional editing by Sean O’Meara
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Sean O’Meara is editor of Asia Financial. He has been a journalist for over 30 years, working on local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.