Can China achieve its 5.5% GDP target amid zero-Covid?

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China's 5.5% GDP Target Faces Significant Challenges Due to Zero-Covid Policy

Analysts polled by AFP forecast China's GDP growth to reach 5.0% for the full year, falling short of the official target of 5.5%. Experts anticipate 4.3% growth for the first quarter, with the stringent zero-Covid policy significantly disrupting supply chains, industrial activities, and consumer spending. The economic cost of these measures is considered very high, raising doubts about the feasibility of achieving the ambitious growth objective.
Disruptions to Supply Chains and Production

The ongoing implementation of the zero-Covid policy, characterized by lockdowns and strict movement restrictions, is causing severe disruptions across China's economy. Shanghai, a critical business and logistics hub housing the world's busiest container port, remains under lockdown. This has led to considerable delays in the movement of goods due to intercity travel restrictions and a notable shortage of truck drivers. Carmakers have already issued warnings about significant supply chain disruptions, with the potential for production halts if the situation persists.
Impact on Consumer Spending and Retail Sales

The zero-Covid policy's impact extends to consumer spending, particularly affecting the retail sector. Goldman Sachs has highlighted that the suspension of dining-out services, which constitute a substantial portion of retail sales, could lead to a significant downturn in this area. As outbreaks spread to dozens of cities, the broader economic consequences of these lockdowns are expected to become more pronounced in April's data, potentially bogging down overall economic growth.
Government Response and Expert Outlook

While Premier Li Keqiang has indicated that state support should be increased and tools such as cuts to banks' reserve requirement ratios could be utilized to aid virus-affected sectors, the overall outlook remains cautious. Experts from 12 financial institutions polled by AFP project a full-year GDP growth of 5.0%, and anticipate a first-quarter growth of 4.3%. The continued adherence to the zero-Covid approach, with its associated mass testing and isolation measures, suggests that short-term economic disruptions are likely to persist.

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Can China achieve its 5.5% GDP target amid zero-Covid?

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