The economic support measures taken this year in China are of “an even greater magnitude” than in 2020, when the country was facing the Covid-19 epidemic, Premier Li Keqiang said.
These statements on Monday reinforce the idea that the economic slowdown in China, largely linked to health restrictions that heavily penalize activity, is serious.
In the second quarter, China experienced a sharp slowdown in growth in a year (+0.4% only), its worst performance since 2020. The country also revealed poor economic indicators for the month of July.
“They are on a larger scale than in 2020,” he said in comments picked up by public television CCTV.
“The task remains arduous to consolidate the foundations of the recovery,” however admitted Li Keqiang, who has drawn a gloomy balance of the national economy several times in recent months.
Consequence of the “zero Covid” policy
Unlike almost all other countries in the world, China continues to apply a strict health policy against Covid-19.
The authorities decree localized confinements, impose PCR tests every 72 or even 48 hours in certain places and pose the risk of quarantine to any traveler who goes to another province.
This policy has strong repercussions on air and rail transport, tourism, logistics chains, household consumption and leads to unexpected business closures as soon as positive cases are discovered.
The real estate sector, the engine of the Chinese economy, has been suffering since the measures adopted by Beijing in 2020 to reduce the sector’s debt. Sales fell again in August by 22% year-on-year, according to the Nomura bank.
To reactivate its economy, China has taken a package of measures since the beginning of the year: an unquantified infrastructure investment plan, tax measures, tax credits or even credit facilities for SMEs.
Beijing also announced last week that it would allow local governments to issue more bonds.
These measures “are not going to change the rules of the game,” warns the economist Ting Lu of Nomura bank, arguing that the anti-Covid restrictions and the uncertainty they generate are the main obstacle to activity.
Source: BFM TV
