What’s new: The impact of China’s ongoing wave of Covid-19 outbreaks could knock more than 1 percentage point from its first-quarter GDP growth, analysts said.
In line with the country’s “dynamic zero-Covid” strategy, local governments are imposing restrictions of different degrees to limit activity, affecting both economic demand and supply.
Businesses involving close contact such as real estate sales and labor-intensive industries including construction and services were hit first, researchers of Huatai Securities Co. Ltd. wrote in a Monday report. Supply chains, business expectations, household income and local government coffers will all be strained, they said.
The researchers expect the number of nationwide daily new Covid infections to peak around late March or early April. The impact on the economy could last at least two months, and may slow down the year-on-year GDP growth in the first quarter by 1.1 percentage points, they wrote.
Guosen Securities Co. Ltd. analysts predicted a bigger loss of 1.5 percentage points in first-quarter GDP growth due to Covid in a Monday report.
In a Wednesday report, researchers of Bank of Communications Co. Ltd. expected 4% GDP growth in the first quarter, the same as in the last quarter of 2021, which was the slowest quarterly growth of that year. A 4% growth rate is lower than the around 5.5% target Beijing set for the full year.
The background: China’s current wave of Covid-19 outbreaks — its worst since early 2020 — has led to tens of thousands of infections across the country. Measures to contain the spread of the virus have included suspension of factory production and lockdowns, including those in Shanghai and Shenzhen. Cities involved have rolled out support policies, such as tax cuts and consumption vouchers, to cushion the impact on local businesses.
First-quarter GDP data is scheduled to be released on April 18.
Read more In Depth: China’s Battle to Stabilize Its Economy
Contact reporter Zhang Yukun (yukunzhang@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)
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