Chinese cities ready to host the next festival; stimulus policies will yield positive results in H2 2022

Shoppers walk through the reopened Taikoo Li shopping mall in Sanlitun in downtown Beijing May 29, 2022. Major shopping malls in the city’s Chaoyang district said they had reopened from Sunday morning, with anti-epidemic measures in place. Beijing has effectively brought the latest outbreak of COVID-19 under control. Photo: CI

After an uphill battle lasting nearly three months, the Chinese mainland has finally seen the daily tally of COVID-19 cases drop significantly, and Beijing and Shanghai are heading towards full reopening. As cities prepare to shed the shadow cast by virus restrictions, speed up the resumption of production and boost consumption, especially with the upcoming Dragon Boat Festival, concerns have also emerged over whether easing restrictions could trigger another outbreak.

The risk of a new outbreak, according to epidemiologists, will still be suspended for the foreseeable future. Still, the experience of dealing with Omicron and tools such as nucleic acid testing stations widely available in major cities will allow China to detect the virus at a faster rate and contain it before it transforms. into a large epidemic, at minimal cost.

As Omicron weakens and cities push for economic recovery, especially after the supply chain resumes, economists have predicted a V-shaped recovery that third and fourth quarter GDP may rebound 6 or 7%, and the strong momentum should continue into the first or second quarter of 2023.

Both Beijing and Shanghai announced on Sunday that they would relax some of their anti-virus restrictions starting this week. On Sunday, the Chinese mainland recorded 20 confirmed locally transmitted COVID-19 cases and another 102 silent carriers, with most of those showing symptoms in Shanghai, Beijing and Tianjin. Sunday marks the fourth day in a row that the daily tally of confirmed COVID-19 cases has fallen into double digits.

Besides megacities, smaller cities like Linshui County in southwest China’s Sichuan Province also managed to contain its outbreak in 20 days and announced they would lower the risk level of local communities. from Sunday.

The final festival of the first half of the year, the three-day Dragon Boat Festival, which falls on Friday, offers a “golden opportunity” for COVID-hit cities to regain momentum. Authorities began selling train tickets for the Dragon Boat Festival holiday on Monday. National online travel platform Qunar has revealed that nearly 85% of travelers will limit their trips to their province of residence. Provinces such as Guangdong, Zhejiang and Sichuan, where no major outbreaks have been reported, have seen a significant increase in train ticket reservations.

In addition to consumers returning to shopping malls in Beijing and Shanghai, other local governments, such as Guiyang and Qingdao, are issuing vouchers in hopes of boosting consumption during the holidays.

With strict anti-virus measures in place, the possibility of another outbreak is slim, an unnamed expert from the Chinese Centers for Disease Control and Prevention (CDC) told the Global Times. He believes that even though Omicron is much harder to detect and the new sub-variant carries more risk, China is coping with the new changes.

Beijing’s experience in containing the new outbreak within 37 days shows that speed is the key to stemming the Omicron outbreak. “Setting up nucleic acid testing centers within a 15-minute walk in all major cities and many public places requiring a valid negative test within 48 hours helps China detect an outbreak more quickly. another major epidemic and chaotic crisis situation that occurred in Shanghai seems unlikely in the future,” the expert said.

Strong rebound

Many foreign media have highlighted the economic shock caused by the anti-virus measures in cities like Beijing and Shanghai. To downplay China’s economic performance, some have predicted that China may miss its 5.5% growth target.

Chinese economists, however, expected a strong rebound in the second half.

Beijing-based veteran economist Tian Yun told the Global Times on Monday that, based on what he learned from several auto industry chain companies in Shanghai, Jiangsu and Jiangxi, many of them have started to resume production, while their manufacturing schedule for June is full. He learned from some factories based in Shanghai and Jiangsu that the return to work rate for their employees should be able to return to pre-pandemic levels by early June.

“From what I have observed, the real problem for many companies is not the lack of orders, but the interruption of supply chains. This latter issue has made some headway after the central government made repeated requests to smooth logistics,” Tian told the Global Times on Monday.

At a conference on Sunday, authorities in Shanghai said they would lift many conditions for businesses to return to work from Wednesday to push the recovery forward.

The Commerce Ministry said on Thursday that it will roll out new measures to remove barriers to foreign trade and enhance the stability of its supply chains, and one of the measures will be to ease pressure from international logistics. The government will facilitate smooth domestic transportation of foreign trade goods and help foreign trade enterprises affected by COVID to resume production as soon as possible.

Tian said Beijing’s roughly month-long lockdown could have a ripple effect on the Beijing-Tianjin-Hebei region. The region’s GDP could fall by 30% in the second quarter and will cause China’s second quarter GDP to fall by 0.2 to 0.3 percentage points.

But he said the consequences of closed-loop management should be milder for Beijing than for Shanghai, because Beijing’s software information industry, which is a mainstay of the city’s economy, is relatively small. affected by measures such as remote working.

Yet apart from Beijing and Shanghai, which suffered a short break due to the outbreak, many other economic hubs are unaffected. Take Shenzhen. The city recorded a total consumption of 23 billion yuan ($3.43 billion) during the four-day Labor Day holiday, a slight increase from last year.

Both central and local governments have put in place various stimulus policies. The State Council rolled out a 33-point package including 140 billion yuan in additional tax cuts and 300 billion yuan in railway construction bonds to support businesses and boost demand.

Last week, China’s State Council also held what was seen as an unprecedented nationwide video conference, which highlighted the need to better implement measures to protect market entities, jobs, people’s livelihood and keep the economy functioning within a reasonable range.

Chen Jia, a researcher at the International Monetary Institute of Renmin University of China, told the Global Times on Monday that since the recent stimulus policies will be implemented in the second and third quarters, there is a good chance that the economy is experiencing robust growth. rebound in the second half of 2022 compared to the first, and intense GDP volatility in both quarters will be unlikely, unless there are unexpected factors such as a resurgence of the coronavirus or more serious external geopolitical tensions.

Tian also predicted that China’s third-quarter GDP would grow by more than 6%, while fourth-quarter growth could reach or exceed 7%. He also said that June will not only see an economic recovery trend compared to April and May, but will begin a long period of economic rebound that could last until the first or second quarter of 2023.

Economists also warned that the downplaying of the Chinese economy by foreign media could not only be aimed at attacking China’s image, but could also coordinate with certain movements of financial capital in Chinese financial markets to obtain better results. bargains.

On the other hand, foreign capital continues to flow into China despite the so-called bleak outlook for the Chinese economy. In April, the surplus of foreign currency settlements and sales stood at $19 billion, a level similar to the average monthly level in the first quarter and higher than the corresponding period in 2021, according to data from the Administration of Foreign Exchange. Exchange status.

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