economic recovery is not strong

The Chinese economy is having difficulty recovering from the recent lockdown imposed by Covid-19. Li announced more reforms and openings. The forecasts for the national GDP, however, are below expectations. An internal investment plan worth almost 74,000 million euros will be implemented. Meanwhile, the flight of foreign capital from the country continues.

Beijing () – The Chinese economy is recovering, but its foundations are not “solid”, Prime Minister Li Keqiang said yesterday at a meeting with the leaders of Shanghai and the provinces of Guangdong, Fujian, Jiangsu and Zhejiang: the economic engines of the country.

China is trying to recover from the crises caused by the strict lockdowns imposed in recent months to contain the resurgence of COVID-19. The danger of a pandemic continues in the country and new sources of contagion continually emerge. The situation is aggravated by the effects of the war in Ukraine on global supply chains and commodity prices.

Until April, Li had largely played a supporting role, sidelined by President Xi Jinping even on economic issues, issues that in the Chinese power system are usually the prerogative of the prime minister. Some questionable decisions that Xi made, such as in the fight against the pandemic (“covid zero” policy), the control of technology companies and the restrictions on real estate giants have brought Li back to the fore, and with him a focus economy more in line with the free market.

In his speech to provincial leaders, Li said that China will continue to promote reforms, improve the business landscape and open up to international markets. In late May, the government approved a package of 33 economic measures, including additional tax cuts worth 140 billion yuan (20.6 billion euros). As reported by Reuters, an infrastructure investment plan of 500 billion yuan (73.7 billion euros) is also ready.

All this might not be enough to reach the annual growth target set by the Government at 5.5%, and Li’s words would confirm it. For a group of economists quoted by the Yicai portal, in the second quarter of the year the Chinese economy grew by only 0.9%, with a growth projection of 4.3% until the end of the year. The experts consulted by Nikkei Asia lower the figure to 4.1%.

China’s recovery has been held back by rising unemployment and weak property investment. On the other hand, investment in infrastructure, exports and a slight increase in consumption are maintained.

An indirect signal that the economic situation in China is difficult is the continuous flight of capital abroad. The Institute of International Finance reports that foreign investors dumped €2.5bn of Chinese bonds in June, the largest exodus of foreign funds from the country in seven years.