Can China reach its around 5.5% growth target under zero-Covid?

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China's 5.5% Growth Target Under Scrutiny Amid Zero-Covid Policy

China's economic growth in the second quarter of 2022 saw a significant deceleration, growing by a mere 0.4% year-on-year. This performance marked the weakest growth since data compilation began in 1992, excluding the initial pandemic shock in Q1 2020, and raises substantial doubts about the feasibility of the government's annual growth target of around 5.5%. On a quarter-on-quarter basis, the economy contracted by 2.6%.
Challenges Posed by Zero-Covid Strategy

The persistence of China's strict zero-Covid policy presents a significant impediment to achieving the targeted economic expansion. Widespread lockdowns, such as those experienced in Shanghai, which led to a 13.7% contraction in its GDP during the second quarter, severely disrupt economic activity. While some restrictions have since been eased, the continued imposition of lockdowns in response to new outbreaks and the spread of variants like BA.5 foster an environment of uncertainty for businesses and consumers, hindering a rapid recovery.
Analysts Project Slower Growth

Reflecting these economic pressures, analysts widely anticipate that China will fall short of its official growth objective. A Reuters poll of economists forecasts that China's GDP growth for the full year 2022 will slow to approximately 4%. This projection underscores the belief among experts that attaining the stated target would necessitate a significant departure from the current zero-Covid approach, a move not currently indicated by policy.
Property Market and Youth Unemployment Concerns

Beyond the direct impact of lockdowns, other economic indicators suggest continued headwinds. The property sector remains in a deep slump, with home price growth stagnating in June and property investment contracting for a fourth consecutive month, accompanied by an 18.3% decline in sales. Furthermore, the youth unemployment rate reached a record high of 19.3% in June, indicating significant challenges in the labour market that could dampen overall consumption and economic momentum.

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Can China reach its around 5.5% growth target under zero-Covid?

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