China’s Premier Li Keqiang issued a third warning about risks to economic growth. Authorities should “add a sense of urgency” when implementing existing policies, Li told local authorities at a seminar Monday. China will study and adopt stronger economic policies as needed to support the economy, he said.
The comments come days after another warning from Li, highlighting the toll the economy is taking from lockdowns and other virus control measures imposed to curb the latest wave of Omicron outbreaks. Car sales slid 10.9% year-on-year last month, and domestic sales of excavators, a leading indicator for construction, plunged almost 64%.
A forecast from Nomura Holdings said the risk is rising the economy may contract in the second quarter if lockdowns are extended after April. Nomura economists estimate that about 373 million people are now under full or partial lockdown in 45 cities making up 40% of China’s gross domestic product. With the central government making Covid containment a top policy priority, local politicians have an incentive to stick with strict controls ahead of a key leadership meeting later this year, Nomura said. “Global markets may still underestimate the impact because much attention remains focused on the Russian-Ukraine conflict and U.S. Federal Reserve rate hikes,” Lu Ting, Nomura’s chief China economist, wrote in a Monday note.
Yesterday Li said Monday that pro-growth measures should be brought forward and accelerated, including tax and fee cuts, sales and usage of special bonds, and incentives to keep jobs. On April 7 he told business leaders that policy measures to stabilize growth should be strengthened. A day earlier, he chaired a State Council meeting that vowed to step up monetary policy action at an “appropriate time.”