Illustration: Chen Xia/Global Times

With Shanghai, China’s largest industrial city, largely on lockdown to stifle a severe coronavirus outbreak, and a dozen other Chinese cities have all stepped up restrictive pandemic measures, the country must step on the gas pedal. accelerator by investing vigorously in national infrastructure projects to accelerate economic growth in 2022.

To accompany the infrastructure program, the government should also increase stimulus spending by implementing a set of more proactive fiscal and monetary policies over the coming months. If warranted, provinces and cities in China should consider issuing coupons to stimulate retail sales and domestic consumption in Chinese households, including promoting sales of big items like electric vehicles in cities, and flat screen televisions, washing machines and refrigerators in rural areas.

And the government is compelled to roll out more accommodating policies to inspire rapid development of the urban real estate sector and faster growth of the most important internet platforms. Both sectors cooled considerably in 2021 as regulators tightened anti-monopoly scrutiny and moved to reduce debt levels for property developers. Now, some Chinese cities have developed more preferential policies to facilitate home sales, with local lenders allowed to lower down payments, while lowering mortgage interest rates.

It is becoming increasingly difficult for China to achieve its projected GDP (gross domestic product) growth rate of around 5.5% set for 2022, which was planned and approved by the National People’s Congress (NPC) , the highest legislature, at the beginning of March. .

The country needs a relatively faster rate of economic growth to provide enough employment opportunities for tens of millions of Chinese workers and recent college graduates to maintain social stability. In addition, continued economic expansion is needed to move China towards its goal of becoming a fairly wealthy society in the world and staying further away from the so-called “middle income trap”. China’s GDP per capita exceeded $12,500 in 2021.

Challenges facing the world’s second-largest economy mount as millions self-isolate in Shanghai, the northeast auto city of Changchun, and a few other smaller towns shut down to quell the latest outbreak of the Omicron variant quickly transmitted. Meanwhile, a prolonged slump in the housing sector and slow recovery in consumption are weighing on the economy, making it urgent for key policymakers to step up efforts to support economic growth.

A gauge of service sector activity in the country released last week plunged to its lowest level since early 2020 as many localities in China imposed strict anti-coronavirus restrictions that prevented people from moving around and severely impacted consumer spending. The Caixin and IHS Markit China Services Purchasing Managers Index fell to 42.0 in March from 50.2 in February, readings below 50 indicate activity is contracting rather than expanding .

Shanghai’s lockdown is of particular concern as the city is a key driver of China’s giant $18 trillion economy. Coronavirus infections have continued to grow with total cases now surpassing 170,000 during Omicron’s latest outbreak wave, making Shanghai the worst-hit city on the Chinese mainland since 2020. Some factories and companies have used closed-loop management with workers sleeping on factory floors to maintain production and ensure crucial industrial supply chains don’t come to a halt.

To help fight and contain the epidemic, central authorities have moved more than 40,000 medical workers from other provinces and the People’s Liberation Army to help Shanghai. However, the country remains worried about how long the city will be able to effectively control the outbreak by cutting off community infections and ending the lockdown so that everything can return to normal and factories can operate at full capacity. ability.

Shanghai, at the current stage, should continue to rely on mass testing and aggressive contact tracing to identify any hidden infections and place their close contacts under quarantine or observation, before bringing local cases down to zero and d prevent the virus from spreading to other provinces.

In order to compensate for the slowdown caused by Shanghai’s unprecedented lockdown, other provinces and cities need to increase investment in infrastructure projects, basic industries and high-tech innovations to spur sustained and high-level economic growth. quality. The four industrial cluster cities, the southern Greater Bay Area in central Shenzhen, the eastern Yangtze Delta region which was ruled by Shanghai, the northern Beijing-Tainjin-Hebei region, and the southwest Chongqing- Chengdu, should spare no effort to stimulate their economic activities.

Meanwhile, to help millions of market entities, small and medium-sized businesses, and self-employed people survive the pandemic, policymakers are forced to offer preferential policies, such as exemptions from more taxes and fees, and tax allowances to help them counter the coronavirus-induced downturn.

Additionally, China’s central authorities are blessed with low levels of inflation in the country, which may push them to come up with more accommodative monetary and fiscal policies to fuel economic growth. While other major global economies, particularly the US and EU, are suffering from high inflation of 7-8% or more, price inflation in China has been held at around 2%, allowing the central bank to maintain a lower interest rate for 2022, and businesses across the country to benefit from low cost lending to expand their businesses.

The author is an editor at the Global Times. [email protected]


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