Fresh signs of the pandemic’s toll on the Chinese economy are expected on Monday, reminding decision-makers of the need to loosen policy and stimulate consumption, observers said.
The warnings come as the government doubles down on its dynamic zero-Covid strategy to contain coronavirus outbreaks, disrupting businesses in a string of Chinese cities, including Shanghai and neighbouring powerhouses in the Yangtze River Delta.
“It’s time to do whatever we can to save the economy,” Huang Yiping, a Peking University professor and a former central bank adviser, said at Tsinghua PBCSF Chief Economists Forum in Beijing on Saturday.
“Cash flow problems have shown up for many enterprises and households. More direct support is needed for affected companies and people.”
Those problems were reflected in car sales and bank loan data released last week.
Car sales fell 47.6 percent to 1.18 million units in April, according to the China Association of Automobile Manufacturers.
And April financial data from the People’s Bank of China showed that both the household and corporate sectors were downsizing their borrowings.
Aggregated financing, a measurement of funding support for the real economy, was 51 per cent lower than a year ago at 910.2 billion yuan (US$134 billion), while new yuan-denominated loans also fell by more than half to 645.4 billion yuan.
State media also reported that many cities reported a big fall in fiscal revenue last month, as tax rebates took effect and economic activity cooled.
“The uncertainty faced by corporations and households are even greater than the first quarter of 2020 [when the coronavirus pandemic broke out],” Nomura chief China economist Lu Ting told the forum.
“As the pandemic enters its third year, many households and corporations have run out of savings and their ability to resist shocks is waning. Rising unemployment is also pushing down household spending.”
Sheng Songcheng, former head of the central bank’s statistics department, said second-quarter GDP growth might slow to 2.1 percent from the first quarter’s 4.8 percent.
Sheng also warned that the rest of the year would not make up for the consumption lost in the country’s lockdowns.
Nevertheless, the government has shown no sign of changing its zero-Covid strategy, doubling down on mass testing and movement restrictions in Beijing and many other cities.
It has also sought to play up expectations for economic recovery and downplay concerns about short-term turbulence.
In an interview with Communist Party mouthpiece People’s Daily published on Friday, NBS deputy director Sheng Laiyun said the outbreaks had dealt “a huge blow” to the economy but there were “positive changes” in some leading indicators such as power generation.
Production was also being restored gradually in areas affected by the Omicron coronavirus variant, Sheng said.