Xi seeks to reactivate the Chinese economy, but the covid reduces the options

President Xi Jinping has pledged to support the technology, infrastructure and jobs sectors to revive the Chinese economy, but analysts warn that growth will continue to slow until Beijing abandons its rigid anti-covid controls.

Two and a half years after the outbreak of the coronavirus in Wuhan, China is the last major economy still closed to the world, despite a relatively low death toll.

Lockdowns in dozens of cities have wreaked havoc on supply chains, driving small businesses out of business and locking consumers in their homes.

This jeopardizes the 5.5% growth target set by Beijing.

“We remain very concerned about growth,” analysts at Nomura bank said this week. “The omicron variant and the zero covid strategy are the main obstacles to growth.”

However, Chinese communist leaders reiterated on Thursday that the country will “unswervingly” adhere to the zero covid strategy. “Perseverance will bring victory,” Xi said.

To ease pressure on the economy, Beijing offered the tech sector a break, sparing it further restrictions, and announced an infrastructure investment package.

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But analysts say the improvements may be temporary as long as the government’s priority remains to curb the virus at all costs.

“(The measures are) very welcome…but how many more bridges and how many more stadiums are going to help us create an environment for predictable growth?” the president of the European Union Chamber of Commerce in China, Joerg Wuttke, told reporters on Thursday.

– Little room for maneuver –

Analysts are waiting to learn the details of the promises of support announced by the government.

But Beijing “doesn’t have much room for manoeuvre,” estimates economist Dan Wang of Heng Seng Bank, a heavyweight in Hong Kong finance.

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