China issues unusual warning on ‘Covid-hit economy’

China is the last major economy welded to a policy of mass testing and hard lockdowns to eliminate virus clusters, but the strict curbs have battered businesses.

Restrictions around the nation in recent months — including on the manufacturing hubs of Shenzhen and Shanghai, as well as the breadbasket province of Jilin — have tangled supply chains and dragged economic indicators to their lowest levels in around two years.

In some ways, the challenges now are “greater than when the pandemic hit hard in 2020”, Premier Li Keqiang told a State Council meeting on Wednesday, according to a readout by the official Xinhua news agency.

“We are currently at a critical juncture in determining the economic trend of the whole year,” Xinhua quoted Li as saying.

“We must seize the time window and strive to bring the economy back onto a normal track.” Li also said officials ought to make sure there is “reasonable” growth in the second quarter, fuelling fears that the country’s target for yearly expansion of around 5.5 percent may not be met.

Li’s remarks are the latest in a growing chorus of calls from officials and business leaders for more balance between stopping the virus and helping the ailing economy.

On Monday, the central bank and banking regulator urged financial institutions to boost lending, citing pressure on the economy, Chinese media reported.

This came as retail sales plunged 11.1 percent on year in April while factory output sank 2.9 percent — the worst showing since the early days of the Covid crisis. And the urban unemployment rate edged back towards its February 2020 peak.

In March, and particularly in April, indicators including employment, industrial production and freight dropped “significantly”, Li said at the Wednesday meeting.

He stressed the importance of coordinating virus control and economic development, according to Xinhua.

On Thursday, the State Council will also send teams to 12 provinces to oversee local work in implementing state policies, the report said.

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