The Wall Street Journal published an analysis, stressing that China’s authorities have no clear plan to turn things around amid April’s economic distressing data. When its zero-Covid policy implementation shrinks the economy, the Chinese regime lacks an explicit and foreseeable path to handle the downturn.
On Monday, China just released its official April data, showing a grim economic outlook, reflecting that Covid-fighting measures have hit the economy harder than expected.
In April, retail and manufacturing sectors witnessed a decline, with retail down 11.1%, much below the 6.1% decrease forecast from a Reuters survey. Industrial production also decreased 2.9% year-on-year, down from a 5% gain in March. The unemployment rate reached the highest of 6.1% since the initial coronavirus outbreak, when the rate was at 6.2% in January 2020.
Investors worry that there’s no official sign from authorities to tackle the problem.
The article points out that China’s credit outstanding, or so-called aggregate finance to the real economy, had a sharp drop in growth in April. This might cause difficulty for its export machine to operate.
Its long-term rates remain high, with five-year central government bonds at 2.6 % since late 2021.
Meanwhile, instead of cutting the rate in response to the April data, China’s central bank does almost nothing.
In addition, stay-at-home orders hurt one-third of the country’s economic output, according to Pantheon Macroeconomics data. Furthermore, the property sector has remained weak since last year’s crackdown.
However, with all the grave April figures, the Chinese regime seems determined to be persistent with its strict Covid policy.
The article does not mention the social impact on the nation, which is much harder to quantify than that of economic data.
The article concludes that all of this shows that top China decision-makers remain too optimistic yet unrealistic with their hash measures.
Until the Chinese regime finds a way out of the overconfident zero-Covid strategy, its economy might have an extended period of slow growth, starting from this quarter.
And it’s still optimistic when international credit rating agencies downgrade China’s 2022 growth forecast to just above 4%.