China's Economy at a "Critical Juncture"... Needs at Least 2.1% Growth in Q2 to Draw the '5-Character' Pattern

CEIBS Must Grow Over 5% in Q3 and Over 6% in Q4 After 2.1% Growth in Q2 to Achieve '5%'
All Four Deputy Prime Ministers and the Premier Attend Meeting with 100,000 Participants... Confirming Serious Economic Situation

[Asia Economy Beijing=Special Correspondent Jo Young-shin] There is a forecast that China’s second-quarter Gross Domestic Product (GDP) will grow by only 1.7% year-on-year in the worst-case scenario. This would be the lowest figure since the minus (-) 6.8% recorded in the first quarter of 2020.

[Image source=Yonhap News]

As the Chinese economy plummeted due to lockdown measures under the 'Zero (0) COVID' policy, the Chinese leadership held a nationwide economic stabilization video conference attended by 100,000 people to devise countermeasures.

Chinese economic media Caijing reported on the 26th that a nationwide meeting on economic stabilization measures was held under the chairmanship of Premier Li Keqiang, and that the most urgent policy task is to prepare livelihood measures for market participants (workers) such as employment.

The media pointed out that among China’s major economic indicators in April, consumption (domestic demand) aspects such as the service sector deteriorated significantly, indicating the severity of China’s economic situation. It also conveyed the forecast of Chinese economic experts that the second-quarter economic growth rate could be only 1.7 to 3.2%.

Professor Sheng Songcheng of China Europe International Business School (CEIBS) and former director of the Statistics Department of the People’s Bank of China said, “The recent COVID-19 (infectious disease) situation has seriously affected the Chinese economy,” and forecast that the second-quarter growth rate could be as low as 1.7% or as high as 3.2%.

CEIBS is a business school known as the top MBA in Asia and the fifth in the world.

Professor Sheng diagnosed that if the second-quarter growth rate is assumed to be 2.1%, China’s GDP growth rate for the first half of the year will remain around 3.5%. In this case, the economy would need to grow by more than 5.5% and 6% in the third and fourth quarters, respectively, to enter the 5% range, he explained.

The GDP growth target set by the Chinese leadership for this year is around 5.5%. The Chinese Academy of Social Sciences divided the Chinese economy at the beginning of the year into three categories: 'below 5%', 'above 5%', and 'above 5.5%'. Below 5% means the economy is poor, while above 5.5% means the Chinese economy is good.

Professor Sheng’s assumption of 2.1% growth in the second quarter is interpreted as a kind of guideline that the second-quarter growth rate must be at least 2.1%. It means that the annual growth rate can be drawn in the '5%' range only if the second-quarter growth rate exceeds 2.1%.

Researcher Liu Xingguo of the China Enterprise Confederation expressed concern that “the growth pressure on domestic companies may increase further after the second quarter,” and that achieving this year’s economic growth target seems difficult. He added, “Economic stability depends on people’s livelihood (employment),” and “We expect large-scale support policies to be introduced from June.”

[Image source=Yonhap News]

Chinese media forecast that the Chinese government will accelerate fiscal expansion policies such as increasing tax refund amounts, easing automobile purchase restrictions (license plates) and acquisition tax reductions, expanding special bond issuance, and increasing coupon issuance as part of economic stimulus measures.

Won Bin, chief researcher at China Minsheng Bank, stated, “The priority is to control the epidemic as quickly as possible and minimize its impact on the economy and society,” and explained, “Within a reasonable scope, government support policies are needed to expand infrastructure investment, boost domestic demand and consumption, and increase employment.”

The Chinese leadership also recognized the seriousness of the economy and held an economic stabilization video conference chaired by the State Council the day before to raise awareness.

Premier Li said, “We (China) stand at a critical juncture that will determine this year’s economy,” acknowledging the severity of the current economic situation. He particularly emphasized that protecting the livelihood of market participants (employment) is the most urgent issue, clearly indicating that employment stability will be the top priority of future policies.

The official Global Times reported that more than 100,000 people from across the country attended the economic stabilization meeting held the day before, marking the largest scale since the meeting on February 23, 2020 (170,000 people) when COVID-19 broke out. It added that detailed economic support measures will be announced at the end of this month based on the meeting results.

The meeting held the day before was attended by all Chinese vice premiers including Han Zheng (in charge of environment), Liu He (economy), Hu Chunhua (commerce and trade), and Sun Chunlan (science and technology), revealing without filter the seriousness of China’s economic situation.

This content was produced with the assistance of AI translation services.