China has signaled that it may miss its annual economic growth target due to the impact of Covid restrictions on the second-largest economy in the world.
The Politburo, the highest policymaking body of the ruling Communist Party, stated on Thursday that it intends to maintain growth within a “reasonable range.”
It did not mention the stated growth goal of 5.5% that it had previously established.
China continues to pursue a zero-Covid policy that has resulted in full or partial lockdowns in major cities.
The 25-member Politburo, led by President Xi Jinping, stated after its quarterly economic meeting stating that leaders would “strive to achieve the best possible results.”
However, it also urged stronger provinces to achieve their growth objectives.
Analysts noted the omission of a GDP reference, even though economists had previously projected it would be impossible for China to attain its 5.5% target.
Iris Pang, the chief China economist at ING Bank, had told the Wall Street Journal, “China’s growth target of 5.5% is no longer a need.”
In addition, China urged larger provinces to compensate for those that were more severely affected by the shutdown.
In a report, Nomura analysts Ting Lu, Jing Wang, and Harrington Zhang stated, “Beijing has demanded that provinces that are relatively well-positioned endeavor to meet their economic and social goals for this year.”
“We believe Beijing is implying that GDP growth targets for areas with less favorable conditions, particularly those provinces severely impacted by the Omicron variation and lockdowns, may be more flexible.”
Earlier this month, China stated its GDP had fallen substantially in the second quarter of this year.
During this time, large Chinese cities, including the main financial and manufacturing powerhouse of Shanghai, were placed under complete or partial lockdown.
China’s once-booming real estate sector is currently in a severe downturn, and home sales have declined for eleven straight months.
Several Chinese developers have halted the construction of previously sold homes due to cash flow difficulties.
In recent weeks, several homebuyers have threatened to stop making mortgage payments until construction resumes.
In 2020, China made the unprecedented choice to abandon its GDP goals due to the pandemic.
GDP measures the size of an economy. Economists and central banks regularly monitor the expansion or contraction of the economy as it is one of the most significant indicators of economic health.
It also aids firms in determining when to expand and hire more employees or when to invest less and reduce the workforce.
